I had a friend who was in the wholesale wine business for 4+ decades. About 10 years ago, a CDP that had been sitting on the shelf without moving had its price raised by about 40%. This made no sense whatsoever to me. Knowing that this wine was in his stable, I mentioned this to my friend. Much to my surprise, he responded: “Well, sometimes that’s what it takes”. Go figure.
“That’s what it takes” how?
You seem to assume that price movements are inherently “arbitrary.” Actually, what’s not so rational is retail pricing, which tends to be very sticky: Once an product has a price sticker, the merchant rarely changes it, even if it’s worth more or less after time, and regardless of demand. I guess that’s true of wholesalers, too, to some extent.
There are lots of reasons to raise and lower prices – lowering them to clear inventory for new deliveries to boost short-term cash flow, or raising them to reflect a change in cost for a new shipment, a high score from a critic or other demand.
I’m really interested in your source of information that prices are rarely raised. As I said earlier, my perspective is that of a consumer and I gave two examples where retail wine prices were raised. I do grasp the concept that prices are raised and lowered according to the perception of what the market will bare.
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You haven’t seen bottles sit on a retailer’s shelf for years, gathering dust, price unchanged?
Not discussed here is the grey market, which can emerge from its slumber when the dollar gets strong.
Indeed I remember one customer buying a BMW 500 series back in the early 80s, when the dollar was very strong. He bought it from a dealer in Hamburg, as I recall, for what worked out to be around 75% of what he would have paid here. He had it still last time I talked to him.
Certain nationally advertised brands, or brands controlled by big companies, don t change prices here when the dollar goes up, but people like Atherton will then source from somebody in Europe
and re sell it here at embarrassingly low prices. This happened a lot around 1985/85.
There is a concept in the world of luxury brands about never lowering prices.
Mel
Read what I already wrote regarding some
Producers and the gray market.
Because the price often bears no relation to the costs of production (certainly more common with more expensive wines)? Perhaps you’ve heard of aspirational pricing (ditto)?
The price on a bottle is whatever a seller thinks he can get, so I guess in that sense it’s rational. I just looked up a bottle of vintage Champane on WineSearcher: prices ranged from $119 to $285, for the same bottle, same vintage, etc. Seems pretty arbitrary to me.
Everybody needs to go read some basic capitalist theory. When it comes to prices, it really doesn’t matter if it’s Smith, Ricardo, Mill or Marx. Cost of production is only one contributor to price, and usually not a major one. Supply and demand is a pretty basic concept, which might explain almost everything noticed in these posts. Prices are never arbitrary. They just are usually more than people want to pay.
Andy, I promise to buy new reading glasses…M
As Jonathan points out, there are all kinds of factors that bear on the price of something, aspirational or otherwise; that doesn’t make the price arbitrary.
I’m still waiting for UPS & FDX to drop prices after raising them because of high fuel costs about eight years ago. Not holding my breath.
The whole issue if of pricing strategy is a fascinating one, one that has been studied at great length. I read this about in a book called Priceless (I have two books called Priceless–the other is about art thefts). My main conclusion was that if you want to study this issue about a million companies will give you a grant.
You want to study world peace—take a number.
Every category of wine is a bit different. Burgundy prices have been going through the roof, so the stronger dollar doesn’t help. With claret, it might help. For most of the wines Oliver sells, it might help a lot, because most of his producers are just trying to sell wine at a fair price.
Don’t forget that shipping costs are based on oil prices, which are dollar prices. So there will be a euro adjustment but then oil prices are coming down. On the other hand, the port here has been a mess.
Okay, you’ve convinced me. I’m officially changing the word arbitrary to predatory,
If someone is willing to pay x for a bottle of wine, I see no reason why someone else shouldn’t sell it for that price. There are exceptions, such as when x is something basic needed by everyone, such that setting pricing may be necessary as a matter of justice. Luxury items like wine, absurdly priced wristwatches, stones that people have oddly extravagant desires for, ingestible items such as fish eggs from very particular fish, etc., will essentially be priced precisely in terms of what the market will bear. That is virtually a physical law. Even Bernie Sanders doesn’t care about the price of Chateaux Margaux, though a consequence of making a serious dent in income inequality (probably a dent much too large to be made by any real world form of politics) might be to bring the price of that down a little.
I totally agree. Caveat emptor!
I think you mean Caviar emptor.
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FYI: Goldman Sachs Makes U-Turn on Euro Forecast After Just Six Weeks
“Goldman Sachs … revived its bearish call for the shared currency to drop to 95 U.S. cents in the next 12 months, analysts led by chief currency strategist Robin Brooks wrote in a note to clients Thursday.”
Bumping an old thread. It does seem that, with a global recession and a strong dollar, that there should be some deals on imported wine? Obviously, there has also been some inflation–but any thoughts of how long it takes the US importers to pass on the savings? I don’t order enough for it to be worth buying from Europe direct–but have to think things being bought by importers now (in dollars) should be significantly cheaper than a year ago?
A lot of orders are placed long ahead of delivery, so it will take a while for this to filter through, if it does.
On the positive side for US prices, the European economies are being hit much harder by inflation and the cutoff of Russian energy supplies. That is likely to reduce demand over there, if the past is any guide.
But there are still issues of wine supply that will likely help put a floor under prices. The heat wave this year will result in a very small crop across most of Europe, I gather. That won’t t help prices.
Many importers buy currency futures. This is true hedging, the opposite of speculation. Over time, if the dollar maintains parity (or better) to the Euro, it should bring prices down, but it is just one of a myriad of factors.
Positive for American consumers of imported wine with disposable income:
Stronger dollar.
Recessionary pressures reducing demand, especially in Europe.
Both recession and cratering currency combined especially reducing UK demand.
Growing rift between China and the West eventually reducing Chinese demand.
Negatives for those American consumers:
Successive vintages with low yields.
Heat not only reducing yields but changing wine styles. See recent Chablis thread.
Fire risk starting to result in reduction of both quality and quantity (see heat).
Increased nationalism could result in increased demand for local wines, raising prices.
Overall I would expect a slight decrease in prices of European wines in the U.S. market. But there are so many factors involved, and increased volatility of politics, economics and climate make this far from certain.
Dan Kravitz