How to raise the price of a wine

Lisa Gilbee is an Australian winemaker working in Puglia and struggling to resurrect interest in old bush-trained or alberello (“little tree”) Primitivo before it becomes extinct. “This is the reason we are here,” she says in an accent halfway between an Australian drawl and smartly clipped Italian.

Since 2001, she and her husband, Gaetano Morella of Morella Wines, have been working with 75-year-old bush-trained vines from their own vineyard, as well as a diminishing group of local winegrowers around Lecce in Puglia. As the number of alberello growers shrinks, she worries about the relatively low prices she can charge for her wines, especially her flagships La Signora and Old Vines Primitivo. Both are priced around €38 ($41.70), not enough to discourage grape growers from removing the alberello in favour of more productive modern vine trellising.

This is Puglia, not Tuscany or Piedmont, after all. Puglia enjoys nowhere near the same market recognition as top Italian regions, which makes it difficult to ask a higher price for a quality and increasingly rare wine. In Gilbee’s case, achieving a higher price for her wines won’t just keep the family company in the black, or add sheen to its reputation, but could potentially save an important regional slice of wine history.

However, as Gilbee is discovering, it’s not easy. “Certainly we are not playing on a level playing field,” she says. “If we made the same quality wine in a more well-known region, we would be able to sell it for more.” She says her vines are very old, making them unique. “If more of the old alberello vineyards had survived, then we might have a strong enough message to change perceptions about Primitivo – well, at least bush-vine Primitivo.”

So what options does Gilbee have if she wants to raise her prices?

What’s it worth?

In his 2011 book Priceless: The Hidden Psychology of Value, author William Poundstone refers to a new theory of pricing known in psychology literature as ‘coherent arbitrariness’.

“This says that consumers really don’t know what anything should cost,” he writes.

Poundstone believes consumers judge prices from cues. “Though a price is just a number, it can evoke a complex set of emotions, something now visible in brain scans. Depending on the context, the same price may be perceived as a bargain or a rip-off; or it may not matter at all.”
One market context to consider is abundance versus scarcity. If something is unique, playing on its rarity can pay dividends, as the family of Peter Brown discovered. One of the eponymous well-known Australian Brown Brothers, Peter died in 2005 in a motorcycle crash. His children inherited his vineyard All Saints Estate, founded in 1864 in north-eastern Victoria and renowned for its fortified wines.

After Brown’s death, his three children – Eliza, Angela and Nick – took stock. All Saints had bottles of Museum Muscat and Museum Muscadelle that were an average of 100 years old, and priced at A$500 ($337.55) a bottle. The children took a bold decision and decided to double their price to A$1,000 each.

“When Angela and I were looking at [increasing] the pricing for the Museum [fortifieds] from A$500 to A$1000 a bottle, we thought that we had the right to do it as it’s the most unique wine in terms of average age, provenance and rarity,” explains Eliza Brown, now CEO of the company. “When we added it up, it really should have been A$100,000 a bottle.”

They upscaled the presentation with a hand-blown Italian bottle and a gold-plated Royal Selangor pourer and offered the wine to international hotels and through the company’s online store and mailing list. “Nobody blinks at purchasing a very old whisky or Cognac that is half its age for much more than this,” Brown says. “I have spent a bit of time looking at the spirits industry and I knew that we could align ourselves with these products if we had the right packaging.”

For wine auctioneer Andrew Caillard MW, the All Saints Estate super-fortifieds meet consumer expectations. The price of an expensive wine, he argues, is based on what it represents. “That’s where the story comes into it, not just for the wine but the whole background story. That’s how it works in France.”

That is definitely how it worked in France this year, at least. On July 17, Loïc Pasquet of Liber Pater in Bordeaux announced he was to release the world’s most expensive wine. He promoted the €30,000 offering as an opportunity to taste what a pre-phylloxera wine might have been like, since the grapes were from ungrafted vines and the winemaking was said to replicate methods back in the late 1800s. “I don’t set the price, the market does,” Pasquet told Wine-Searcher.

Ambition and status

“I’m hell-bent on having the most expensive Cabernet Sauvignon in Western Australia,” says Jeff Burch. The owner of Howard Park Wines in Margaret River makes no secret of the fact that he has a new wine lined up for release at a price yet to be determined. However, it will be considerably more than the A$150 he charges for his existing top-priced wine, Margaret River Abercrombie Cabernet Sauvignon.

The name of the mystery wine is AB29, in honour of his wife, Amy Burch, and Block 29, his best Cabernet block. Burch already knows that, with production limited to just 75 cases, it will be sold principally in Hong Kong, not Australia: this is all about status. “I haven’t set the price yet just in case someone sets [their wine price] higher. In my head it’s A$500 a bottle,” he adds.

It is rare for winemakers to be so calculating, or rather for a winemaker to be so public about being so calculating. Burch believes that one of the key reference points in deciding quality is price. “My guys in Hong Kong said if you come out at A$350, it’s no man’s land. Come out at A$500 or stay at A$100 or wherever you are. Unless it’s A$500 it won’t work.”

The lesson here is to launch into a market willing to pay high prices – but do some homework. It also helps to have a connection or existing quality winemaking reputation. And don’t take the same old wine and rebadge it. Most distributors and retailers will see right through that strategy.

Prominent German wine producer Ernie Loosen, of Weingut Dr. Loosen in the Mosel, is unimpressed by makers taking advantage of an emerging market like China, or deliberately seeking higher prices to make a statement. “You can bring a [new] special wine out, okay, but personally I don’t like the idea,” he says. “People demand value for the money. This is not a good argument to say we want to be the most expensive. You have to show something special, something rare with a long history behind it.”

Head up the ladder

Premiumisation – the push to get consumers to trade up to higher-value products – is one of the more significant trends affecting the global wine market. The term is taken to mean getting the consumer to pay more by offering a premium experience, with better wines in more attractive bottles. The predicted growth in the US wine market in the next 12 months is likely to come from wines priced $15 or more per bottle, which is the price point at which producers begin to earn better margins.

Australia’s peak wine body, Wine Australia, is a firm promoter of premiumisation and reports strong growth in exports of higher priced Australian wines. Exports at A$10 or more per litre FOB increased by 23 per cent to a record A$672 million during 2016-17.

Premiumisation might be today’s buzzword, but a price rise alone doesn’t always work.

“Retailers are generally not keen on brands wanting to increase their price because the brand is hoping to change its position in the market,” explains former Tesco supermarket wine buyer-turned consultant Philip Reedman MW. “Retailers want a justification for the increased price and a level of comfort that sales won’t fall at the new RSP [retail selling price].”

Done right, it can work. Wynns Coonawarra Estate raised the price of its flagship John Riddoch Cabernet Sauvignon from A$130 to A$150 with the release of the excellent 2012 vintage some years back. “The good vintage helped and it has been accepted,” says chief winemaker Sue Hodder.

But sometimes a price rise doesn’t work. A well-known Australian winemaker launched his brand into the UK a few years back and benchmarked the price against what he considered was his competition. He set it relatively high. The first vintage sold out and on the back of that he increased the price for the second vintage. There was a consumer backlash and the winemaker had to start the process all over again in a different market segment. Not easy.

“If all the elements of the product are aligned then this does arouse initial interest,” stresses Reedman MW, but “invariably it needs to be backed up by a third-party review. Third-party endorsement is a huge thing all along the supply chain, and not just with consumers. Sadly, too, it seems to need a suitably impressive heavy bottle – climate crisis be damned – and, of course, a cork closure!”

For Lisa Gilbee at Morella Wines in Puglia, seeking to save the ancient tradition of growing old vine Primitivo by the alberello or bush-trained method, there is much to consider. In order to make any impact she needs to consider not only quality but also the increasing rarity of the style.

And she needs the confidence to ask for a higher price for the wines. Because, after all, price is arbitrary and perception is everything.