Jump to content

A Few Comments on Wine Pricing and Sales Myths


Joe Riley
 Share

Recommended Posts

As a D.C. wine retailer (who doesn't advertise in the Post - never has, probably never will) I can tell you that in any given week, you can find many national and popular brands on sale somewhere. Some brands are seemingly on sale in perpetuity.

For example, we sell Kendall-Jackson Chardonnay for $13.99. That is a "normal" price for that wine, and not unreasonably priced. The problem is, on any particular day, you will likely find it on sale for $9.99 or perhaps even less. As a result, many consumers believe that to be the "normal" price for that wine.

I'm sure that most of the folks here are familiar with the concept of the "loss-leader", an item priced just above wholesale cost and advertised as such to lure consumers into their store. From most points of view, they make sense - after all, 90% of retail is simply getting consumers to enter your premises, at least in a brick and mortar retail world. Many distributors have a love/hate relationship with loss-leaders. They tend to generate sales volume, but they also are brand-killers, as so many retailers such as myself refuse to push them because we can't make any money on them.

If someone doesn't want to buy a particular wine at my store because they can find it cheaper elsewhere, fine, that's their right and it goes with the territory. It's really no skin off of my nose. (Though I do find it mildly amusing on those occasions when a customer is standing right there in the store and they decline to buy a wine because they can find it for $0.05/bottle less somewhere else. Doesn't their time and gas have any value to them? Sheesh...)

What DOES bother me is when we are considered to be a more-expensive store because we have the audacity to (*gasp!*) price these loss-leaders at their "normal" retail prices.

Folks, my store is as competative as anyone else in town on NON-SALE items. Frankly, I've had people from Maryland, Virginia and some other states comment on how much LOWER our prices are than the ones they are used to seeing. I've even come to tell people, "I'm happy to charge you more if it will make you feel better" :lol: (hee, hee)

There will always be exceptions. My customers from Pennsylvania can never understand why it is that Yuengling costs aprox $10/case more here than in a Pennsylvania State store, where you are required to buy by the case on beer, and they'll put it in your car for around $15. Gee, could it be that Yuengling is a Pennsylvania beer and, thus, is cheaper there to begin with? Someone has to haul it to D.C. and warehouse and deliver it to us, you know. That all costs money. Sorry, but that's reality.

My favorite wine example is this one: A few years ago, we were short on a case of Murphy-Goode Fume Blanc that we needed for a catered event on a Saturday. So we just decided to go and buy a case at retail and pay cash for it. Our shelf price on it at the time was $10.99/bottle, with a case price of 10% off (which is standard, industry-wide) of $9.89. My guy went to a store here in town, a popular advertiser, and they were selling it for a normal shelf price of $12.99, BUT the salesman promised that he'd give my guy 20% off (!!!) which lowered the price to $10.39. So his 20% off was higher than our 10% off, but it sure does sound better, doesn't it? WOW, 20% OFF! WHOO, HOO!

Well, last week, one of the city's biggest advertisers had a feature on Estrella Pinot Noir and trumpeted that it was ON SALE for $6.99, and that their regular price on it was $8.99. Folks, our shelf price on that wine has been $6.99 all along, and with a 10% case discount, you'd actually be paying $6.29, but I'd probably round it down to $6.25 to make the math easier and just charge you $75/case.

My point in illustrating this is to demonstrate that the "advertised price" in a newspaper ad isn't always necessarily the lowest price in town. It still pays to shop around. It all depends on the particular wine in question.

What you have to understand is, some stores have committed themselves to a certain sales volume to win a credit from a winery (or wine company) on the back end. Example: If we were willing to commit ourselves to, say, 500 cases of Brand X Chardonnay, we could negotiate a particularly low price which would allow us to sell it for right about normal wholesale cost, but once we hit that 500 case depletion, the wholesaler will credit us $X back to make up for our losses (with the wine company kicking in the money to the distributor to help them with their cost outlays) It's how national brands are able to make volume sales in wine, but this forces the retailer to constantly give away that wine to meet their sales committments. It's a vicious cycle.

I once asked a regional rep why a certain advertiser was able to sell a certain wine that I liked for below our cost. They replied that the advertiser in question, "bought 100 cases per month" EVERY month, of the wine we were discussing. "Oh", said I. I'm sure some people never bought that wine from us because it was a good $2+ cheaper at the advertiser's store, and they probably thought that we were pirates. If they only knew the truth.

Some years ago, we wouldn't TOUCH Guigal Côtes du Rhône because every advertiser in the city bastardized the price, and we simply weren't willing to play that game, it seemed pointless. What's the point in stocking huge quantities of a wine if we can't make any money on it? Ridiculous. That isn't a wine that we "needed" to be selling, so we'd stay the heck away from it But folks would ask.

There are stores that will match any advertised price in the city on certain items. Well, we've been known to do that too, provided that it isn't below our cost, and if you are there in our store with the ad in hand as proof. Basically, if we feel that it is a reasonable price, we'll do it. After all, there you are in the store already, and we'd like to make you happy. It doesn't hurt to ask. But some prices cannot be matched, on any number of reasonable grounds, but that doesn't mean that we won't make it worth your while. As David Letterman likes to say, "C'mon down, we'll talk about it. Bring the wife and then we'll dicker." :huh:

Link to comment
Share on other sites

Thoughtful post, Joe.

Just one minor correction on beer in PA.

The state store system there sells only wine and liquor. On those products, however, they do get some great deals because the PLCB is one of the, if not the largest single buyer of spirits in the country and maybe the world.

Beer by the case is sold in "distributorships", small businesses licensed by the state. It used to be very difficult to find places to buy just a sixer for off-site consumption. However, in the last decade or so, the PLCB has greatly increased the number of stores able to hold off-site licenses, but it's still not like you can walk into any 7-11 and buy beer.

Link to comment
Share on other sites

Joe,

An interesting and informative post. Obviously there are lots of reasons that a certain wine at a certain store will be cheaper than somewhere else; overhead, the wine isn't moving, the store got a special price so the distributor could move it as the next vintage was in the pipeline and they needed to get rid of stock, etc.

What burns me is the extremely high prices that I have to pay in Montgomery County because the county is the only legal wholesaler and they jack up the prices to the retailer and the restaurants (yes even restaurants can't buy from anyone except the county). I once say a restaurant's price list from the county. The prices that the retailer was paying to buy the wine was higher than I could get the same wine for in DC or VA at retail. I once purchased a wine from a store in VA for $14.95, at the Montgomery County branch of the same store, the same wine was $18.95, and the owner said it was because he had to buy it from the County wholesaler to sell in the Montgomery store, at a higher price than he paid from the wholesaler in VA.

The other thing that occasionally gets my goat is watching the price of certain wines soar due to the lack of availability or because of high scores from Parker or WS. I know that supply and demand is a fact of life, but when I see things like the Karl Lawrence Cab (not the single vineyard Cabs) that are sold at allocation for $50 going for over $100 on the retail shelf, I wonder. I recently saw a Kosta-Browne Pinot Noir Sonoma Coast 2002 (WS 87), which sold for $28 if you were on the allocation list, selling for $99 at a DC retailer. I realize that it is not easy to get, but that kind of markup at the retail level makes one wonder. But I guess there are those out there who will pay that given the hype that Kosta-Browne has gotten, and how hard it is to get if you are not on the mailing list. Another example was a Martinelli Zinfandel Russian River Valley Jackass Vineyard 2002 (WS 88) which sold at the winery for $50 going for $125.

I guess I shouldn't complain since I can't even keep up with all my allocations, but when one sees these types of prices, one wonders. Of course, the amount of these wines available makes the profit the retailer is making at these prices nice, but not enough to keep in business. After all, it is volume, not high markup that makes a retailer profitable. As wine unsold brings in no profit and a lot of wine sold at a reasonable markup does.

Link to comment
Share on other sites

Obviously there are lots of reasons that a certain wine at a certain store will be cheaper than somewhere else; overhead, the wine isn't moving, the store got a special price so the distributor could move it as the next vintage was in the pipeline and they needed to get rid of stock, etc.

Yup, those things happen all the time.

What burns me is the extremely high prices that I have to pay in Montgomery County because the county is the only legal wholesaler and they jack up the prices to the retailer and the restaurants (yes even restaurants can't buy from anyone except the county).  I once say a restaurant's price list from the county.  The prices that the retailer was paying to buy the wine was higher than I could get the same wine for in DC or VA at retail.  I once purchased a wine from a store in VA for $14.95, at the Montgomery County branch of the same store, the same wine was $18.95, and the owner said it was because he had to buy it from the County wholesaler to sell in the Montgomery store, at a higher price than he paid from the wholesaler in VA.

Yeah, MoCo is crazy, but that's how you get 5 million dollars extra per year for your excellent public schools. Doug Duncan always brings up an interesting point though - should government be in the alcoholic beverage business? Privatize it and make MORE county money through taxes, I say. They are the ONLY county in the U.S.A. that does this.

The other thing that occasionally gets my goat is watching the price of certain wines soar due to the lack of availability or because of high scores from Parker or WS.  I know that supply and demand is a fact of life, but when I see things like the Karl Lawrence Cab (not the single vineyard Cabs) that are sold at allocation for $50 going for over $100 on the retail shelf, I wonder.  I recently saw a Kosta-Browne Pinot Noir Sonoma Coast 2002 (WS 87), which sold for $28 if you were on the allocation list, selling for $99 at a DC retailer.  I realize that it is not easy to get, but that kind of markup at the retail level makes one wonder.  But I guess there are those out there who will pay that given the hype that Kosta-Browne has gotten, and how hard it is to get if you are not on the mailing list.  Another example was a Martinelli Zinfandel Russian River Valley Jackass Vineyard 2002 (WS 88) which sold at the winery for $50 going for $125.

Those prices are userous. We NEVER do that sort of thing, it just isn't worth it. Personally, I prefer selling rare allocated wines to the customers whom I know will enjoy it and letting it go out normally. My friend Mr. Tilch at Silesia Liquors in Maryland sometimes simply refuses to sell a particular wine - "It's not ready to sell yet" he will say (ha!) and I love that approach, but we sure don't have the library room that he has.

Link to comment
Share on other sites

Thoughtful post, Joe.

Just one minor correction on beer in PA.

The state store system there sells only wine and liquor. On those products, however, they do get some great deals because the PLCB is one of the, if not the largest single buyer of spirits in the country and maybe the world.

Yeah, I've always heard that - they're a monster, aren't they? What a system. Still, they drive a lot of people to Delaware and Maryland to buy wine at lower prices. D.C. too. It's good to be a monopoly, isn't it? :lol:
Link to comment
Share on other sites

Doug Duncan always brings up an interesting point though - should government be in the alcoholic beverage business?  Privatize it and make MORE county money through taxes, I say.  They are the ONLY county in the U.S.A. that does this.
Interestingly one of Duncan's campaign promises when he first ran for County Executive was to "get the county out of the alcohol business." Before I left MoCo for the green climes of Virginia, I wrote a letter to him asking how that campaign promise was going. His response amounted to "things change".
Link to comment
Share on other sites

Every year I write my county councilman and the "at-large"s to kill off that system.

I tell them that I drive to DC or VA to buy all of my booze, maybe I should start mailing them my receipts.

It's not just direct sales, but restaurant sales as well that would go up. Ask any number of owners or potential owners why they don't open up places in Silver Spring or Bethesda and I'll bet they mention the county liquor board.

Beyond attracting more spots, I'd probably go out in MoCo more if I wasn't forced to pay 3 times retail at a MoCo restaurant for a bottle of wine that retails at $9 at Calvert-Woodley.

Link to comment
Share on other sites

Yeah, I've always heard that - they're a monster, aren't they?  What a system.  Still, they drive a lot of people to Delaware and Maryland to buy wine at lower prices. D.C. too.  It's good to be a monopoly, isn't it?  :lol:

They are actually getting smarter about this. If you were to go into the stores in the Philly area you will find a nice selection with prices that cannot be beat out of the PLCB system. John Newman, the current Chairman of the PLCB, has made a concerted effort to stem the flow of wine buyers out of PA. He has instituted "Chairman's Specials" in the systems "Premier Collection" stores. These are generally very good wines that are purchased in such quantity that they can demand better pricing from the wineries. That saving is passed along to the customer. Thus keeping that money in-state.

Before anyone thinks that I am a cheerleader for the PLCB, I should note that I loathe the all aspects of the PLCB, including the idea that only three people can decided what wine or spirits are sold in the state to the use of public money and influence to distort the national wine market as they do.

Link to comment
Share on other sites

Yeah, MoCo is crazy, but that's how you get 5 million dollars extra per year for your excellent public schools.  Doug Duncan always brings up an interesting point though - should government be in the alcoholic beverage business?  Privatize it and make MORE county money through taxes, I say.  They are the ONLY county in the U.S.A. that does this.

Iagree with the excellent school system, but the profit a couple of years ago was $139 million, not $5 million. The county claims it can't afford to get out ot the wholesaler/retailer business, and whenever it comes up they trot out a lot of employees of the county stores who complain that they will lose their jobs.

Link to comment
Share on other sites

Jonathan Newman has been a boon for the PLCB and Pennsylvanians in general, but don't hold him on too high a pedestal. Many of the "Chairman's Selection" wines are close-outs, the same kind of closeouts that get into the DC market. However, a lot of domestic guys with closeouts now go to Jonathan first, which means a lot of just-off vintage, solid California stuff whose producers had too much price hubris. Said price hubris, of course, allows Mr. Newman to make displays showing HUGE discounts :lol: .

Link to comment
Share on other sites

Jonathan Newman has been a boon for the PLCB and Pennsylvanians in general, but don't hold him on too high a pedestal.  Many of the "Chairman's Selection" wines are close-outs, the same kind of closeouts that get into the DC market.  However, a lot of domestic guys with closeouts now go to Jonathan first, which means a lot of just-off vintage, solid California stuff whose producers had too much price hubris.  Said price hubris, of course, allows Mr. Newman to make displays showing HUGE discounts :lol: .

I do not hold Mr. Newman in any esteem, I have had the misfortune to meet him, and felt like I needed to take a shower. I hope not to have that experience again.
Link to comment
Share on other sites

Ask any number of owners or potential owners why they don't open up places in Silver Spring or Bethesda and I'll bet they mention the county liquor board.

Count me in that boat! Its the main reason I am not operating a restaurant a couple of minutes from my home istead of a 30 to 40 minute drive!

Link to comment
Share on other sites

Interesting thread. At least we have plenty of choices. My parents retired to a small community and you have to drive quite a ways to be able to buy anything beyond plonk. MC is a funny place. I deplore dining there as restaurants wines are marked way up and no corkage is allowed. Yet, their booze prices can be the best around especially on malt scotch and other higher end spirits. Given all of this, this area is still one of the best in the country for wine and spirit lovers. If Maryland would only allow direct shipping of wine.

Link to comment
Share on other sites

Count me in that boat!  Its the main reason I am not operating a restaurant a couple of minutes from my home istead of a 30 to 40 minute drive!

It is the reason that not a single restaurant in Bethesda/Rockville has a great winelist. I owned a restaurant in Montgomery County 15 years ago and can assure you that it is a horrible way to do business.

Link to comment
Share on other sites

It is the reason that not a single restaurant in Bethesda/Rockville has a great winelist. I owned a restaurant in Montgomery County 15 years ago and can assure you that it is a horrible way to do business.

It is unfortunate too because there are some excellent chefs in MC.

I occasionally talk to restaurant owners in MC about their feelings about allowing corkage if the county would permit it. The range of answers is interesting. Quite a few feel that it would be a great idea, others have no idea what I'm talking about, and several have said that they don't want to permit it or even have a decent wine list because they feel that a bottle of wine on the table encourages diners to linger over the meal and hurts their turnover.

Of course, that is why I go to DC for a nice meal when I want to be able to bring something out of my cellar. I'd love to be able to do the same in MC, and to have wine shipped to me there instead of having to ship it to DC, but as long as Donald the Ogler is Comptroller, and the distributors continue to give huge amounts of money to candidates in MD, it won't happen.

BTW. Mark. We are going to dine at Citronelle next month at my son's request for his birthday, even though he knows that corkage is not permitted. I just hope I can make up my mind from your great list. I'll be sure to ask you for assistance.

Edited by dinwiddie
Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...