Yields are down and your costs of goods are up. Inflation, supply chain issues, Covid 19, production costs: the list goes on. However, most importantly, everybody seems to be raising their prices. Maybe it makes sense for you to increase your prices as well. Before you jump on the bandwagon, there are three things that I would seriously consider before making significant changes.
Is the demand for your wines outpacing your supply?
Is your distributor communication and distributor messaging strong and compelling?
Is your strategic plan to raise price well thought out?
Even though it’s tempting to raise price along with other brands, it’s also important to evaluate your inventory before doing so. It seems like common sense, but many wineries do not take the time to forecast out sales based on current trends as it relates to what inventory they have in stock. There are wineries that are taking price increases even when they are behind on vintage, and when they have struggled to have successful working relationships with their distributors. If you are already having a hard time moving through your wine, I do not recommend raising prices at this time.
Instead of jumping price points right away (giving distributors one more reason not to sell your wine), work on enhancing your story and level of collaboration with your distributor and create some hype regarding your brand. Get in some team meetings, work on a programming calendar with your portfolio manager, create a new brand profile sheet, build some practical selling tools, and make sure that every single person at your distributor knows what makes your brand special. Once you create some excitement and get caught up on older vintages, you will be in a much better position to consider price increases. With some creativity and enthusiasm, you can usually sell through your current inventory and get to your latest vintages in a relatively short period of time.
Once your brand is healthy, and you have successfully created demand that is outpacing your supply, it is probably time to consider raising your prices. Work closely with your distributors to manage these changes. Obviously, with the pandemic still in full swing, retail is more important than ever. Therefore, strategic retail price points must be hit. If your wine is currently $20 SRP and you are selling out, maybe you raise your price to $25 a bottle SRP (the next strategic price point) but be prepared to support volume deals to get down to your original $20 SRP. Random price increases that end up in no man’s land like $22 retail or $47 retail are not strategic while $20, $25 and $50 retail are strategic. Work with your distributor to come up with the best strategy to raise your SRPs without losing customers and momentum. Each market may be slightly different in their approach, and the key again will be distributor collaboration.
In the end, you want to be more profitable and so does your distributor. You both want to sell more wine and have fun! Work hard, tell your story, and create a strategic pricing plan, and you and your distributors will win.