Influencing Factors in Wine Pricing

Running head: INFLUENCING FACTORS IN WINE PRICING
Influencing Factors in Wine Pricing
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1INFLUENCING FACTORS IN WINE PRICING
Executive Summary
The purpose of this report is to discuss the influencing factors of wine
pricing. Factors like grape variety, region, vineyard resources,
winemaking process, reputation, and the price-perceived quality of
the consumers influence the price pointing of wine. The information
regarding the appellation and terroir of wine play significant role in
pricing wine as these two aspects are determinant factors of quality
as well reputation of the wine. This also indicates that this information
should be displayed in the wine label for the price-perceived quality of
the customers and subsequently marketing. The reputation of the
wine, created by various experts and rating system, is also crucial in
determining the price of wine as well as the marketing of the product.
The case study of Stanton & Killeen winery supports the discussion.
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2INFLUENCING FACTORS IN WINE PRICING
Introduction
There are multiple factors that determine the price of products and
services, such as the cost of the production, the demand for the
products and services, the determined price of the competing
companies, the purchasing power of the consumers, regulations and
standards fixed by the government, company objectives, and the
used method of marketing. In the context of wine, a few additional
factors come into consideration while determining the price. Wine
price pointing is influenced by several factors including inherent
aspects to the winemaking (Staley, Blackman, & Oczkowski, 2017),
and features of the market (Lee, 2012). The former referring to
attributes like grape variety, region, vineyard resources, winemaking
decisions, among others, while the later focuses on the reputation of
the wines in the different markets, quality perceived by the customer
and all the emotional aspects related to the product (Ali, & Nauges,
2007; Cecchi, 2017). The purpose of this report is to explore the
various factors that determine the price point of wine and their
relationship with the input price.
Influence of essential wine attributes
What could mean obvious is the fact of considering inherent
production costs in order to determine the final price of the wine.
Quality of the wine could be determined by different aspects such as
grape variety, location, picking method, fermentation, among others
(Carew, & Florkowski, 2010), and at the end it is this quality the one
that could determine in good proportion the price of the final product
(Ling, & Lockshin, 2003). In other words, the determination of the final
price depends directly on the cost of its attributes. Producers might
consider historical sales, consumers demand and previous experts’
considerations in order to determinate the wine price (Oczkowski,
2016).One of the aspects that influence the most when considering
input costs is the wine region, as its level of reputation could support
the price (Ling, & Lockshin, 2003; Schamel, & Anderson, 2003).
According to Ling & Lockshin (2003) in majority of the cases, the
prices are mostly set by experts’ opinions as quality aspects are
subjective and may vary from person to person.
As stated by Oczkowski (2016), the price and quality of the wine
strongly depend on the available information on the quality of the
wine, which indicates to the geographic appellations of the wine.
Carew and Florkowski (2010) also support this by stating that
information displayed on the label regarding reputation, colour,
vintage, and appellation are significant factors for the customers
while purchasing. The area where the grapes have been cultivated
has a crucial role to play behind the quality of the wine as well as its
reputation. As observed by Atkin and Johnson (2010), the assessment
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