Wine pricing and the Italian mentality

I can almost hear your groans. "Oh God, not that again! Can't Strappo stop crabbing about producers' wine pricing?"

Well, folks, this time Strappo isn't crabbing. He's categorizing. He's attempting to bring crystal-clear order to a most fuzzy topic. 

Background: At TerroirVino in Genoa, the Strappo in question gave a brief presentation (on PowerPoint, yet! God forgive him!) entitled La Brutta Realtà del Mercato Americano. In 12 simple slides he showed how and why a 6 euro bottle of wine became nearly $30 on a retailer's shelf in the USA, hence very very hard to sell in these endless days of Great Recession. Jaws dropped. There was despair in the audience. There were testy questions after. But recent experience tells us that pretty much any wine that the producer sells for over 5 euros will tend to languish on the shelf here. To sell at all well it has to represent something extraordinary in quality and character.

Which is not to say that Domenico Selections hasn't recently taken on some wines that, from the cantina, exceed that magic price of 5 euros. We have. We are talking with some producers about more. Still, all parties are aware that the wines will be ordered by the pallet and not by the container in the foreseeable future.

With the many encounters we've had with wine producers, I think we can distill the pricing strategies into 4 categories.

 1. Aspirational. This is common and easy to deride. If a famous property down the road can charge 15 euros for a Barbera, then Signor Z thinks he's justified in doing so too. "His soil is just like ours, and he used to buy my grapes." That argument is heard with some regularity. One may point out that, regardless of the excellence of sig. Z's wine, he's not famous while the other guy is. One will be ignored. And one must bid him adieu.

2. Desperational. Sig. A makes very good wines. They may not be quite as exquisite as Sig. B's, on the other side of the township, but they are distinctive, elegant, wonderfully drinkable. Why are his prices 25% higher than his neighbor's? "I have this property to keep up, I have 3 kids to raise and educate, and I have to take care of my ex-wife who has custody of them." The man has bills to pay. He has mouths to feed. 

Sig. B is single and -- like so many -- still lives at home. Sig. B can charge less because he has fewer worldly obligations. And his wines have a far better chance of catching on in the States; the price/quality ratio is exceptional. Sig. B wins the contract.

3. Strategic. Or, really, strategic sacrifice. Signorina C really wants her wine in the United States. She gets the arguments about the fierce competition for space on American wine-store shelves. She understands the on-going economic problems. Still, long term, she feels that she has more potential for sales than in Europe, and there's that old, still undulled magic of America. If you make it there, you can make it anywhere. Miss C agrees to lower prices for a determined length of time to gain a foothold in the US market. Then -- who knows. The wines may really take off. This approach takes guts and confidence. It's all about the future.

4. Cashflow. There are some producers -- often big co-ops -- who have lakes of wine to sell. They know they have to keep it flowing out to customers to get the cash back in. They're big operations. They have a plethora of labels and levels. They can strike deals and give good prices without crying about it too much. They're businessmen, and they tend not to weep over your niggardly insults to terroir and tradition. If they're buying grapes from 600 farmers that position makes zero sense. Margins are lower but volumes are hundreds of times the norm. These guys are plugged into the global economy.

Before we shed too many tears for Italian wine producers, let's consider the comment made by a Twitter friend and attendee at TerroirVino. 

Giovanni Lovato, who is from Milan but has lived 40 years in New York State, reminded me of a truth I'd forgot: "When they start crying about money, don't believe 'em. Italians always have something on the side."

    

  

  

Comments

[scott luetgenau]

Good stuff, Strappo. I'm amazed that they were so surprised at the price the American consumer pays.

[Strappo]

We took to showing them the presentation and then taking them on to winesearcher (or I downloaded relevant pages when there was sure to be no wifi). A real education -- some of them looked ready to cry.

[Jo Cooke]

Great post Strappo! That's pretty much it, in a nutshell.
Though the slow death by Powerpoint obviously contributed to their despair.
I wish I was Italian and had "something on the side"!

[Strappo]

It was a short PPT! 7-8 minutes, tops.

As to your last comment: Me too.

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