Welcome to the SSU Wine Business Research Database
This site is intended to be a resource for members of the wine community and others who are interested in finding the latest research on critical wine business issues. To use this site, please click on the research category in which you are interested on the left. This will take you to a list of SSU Wine Business Faculty Publications. If a copy of the publication is not provided via a web link, please feel free to contact that faculty member (using the faculty resource list on the right) for more information. In the past ten years, SSU Wine Business Faculty have published more than 150 research articles and books.
Price, Promotion and Profits
By Steve Cuellar and Dan Karnowsky.
Originally Published by Wine Business Monthly.
On the business side of the wine industry, wineries are often consumed with three issues: distribution, pricing and promotion. While these may appear to be three very different concerns, they are inextricably connected. For example, distributors will tell you that price is one of the single most important factors in achieving the widest possible distribution. Once on the shelves, however, each wine must fight for consumers. This is when questions regarding promotion arise. How much should you spend on promotion? When is the best time to promote? What is the best price promotion combination? These are a few of the questions wineries must ask themselves when deciding how best to allocate resources towards the marketing of their wines. Like all investments, wineries want to maximize their return on promotion.
These issues are especially important in the wine industry where domestic wine producers face competition from an increasing number of feorign and domestic producers. This point was emphasized at a recent wine industry seminar in early 2008, where a panel member stated that a new winery opens in California each day. Likewise, at another symposium in 2007 on wine industry trends, a representative from The Neilsen Company showed that much of the proliferation of SKU's in an attempt to attract new consumers. More wineries producing more SKU's underscores the fact that each brand must fight to differentiate itself from competitors. While pricing is vital in such highly competitive markets, firms also rely on promortional activities to differentiate their products from competitors'.
Because of the importance and prevalence of promotion in the wine industry, measuring its impact is a main concern. There are a variety of ways in which this is attempted. One way to measure the effect of promotion on sales and revenue is to compare sales and revenue before promotion with sales and revenue after promotion. Alternatively, you could compare sales and revenue in one market where promotion occured with sales and revenue in another market where no promotion occurred. Neither of these methods, however, properly accounts for any change in price that may have occurred.