In our last \u2018dribblings\u2019 piece we talked about why allocations as a marketing strategy were created.\u00a0 Essentially it started as a way to apportion in demand goods to a wide range of customers, as well as a way for the seller to control the distribution patterns of his wines.\u00a0 Admittedly, the fact that wine is a unique product that cannot be replicated or reproduced creates some scenarios that most businesses do not face, though the wine industry (mostly wineries themselves) have gone beyond what would be enough to effectively deal with the problem of limited stock to supply overwhelming demand.<\/p>\n
Many wineries have taken the position that they not only want to sell their juice, but also micro-manage who gets the opportunity to purchase said juice.\u00a0 Why would someone care about that as long as the wine gets bought and paid for?\u00a0 We are not the people to ask, and can generate volumes with stories of wineries going out of their way to control where every bottle goes.\u00a0 But it is a fact of life in the wine business and has been for a long time, both among those who have those high-demand, limited items, and those who\u2019d like to think they do.<\/p>\n
We regularly see special offers from wineries that have been so effective in \u2018allocating\u2019 that they haven\u2019t sold much of anything.\u00a0 But that is a story for another time.<\/p>\n
At the end of our last piece, we made reference to some of the new techniques wineries are using in their \u2018allocations\u2019.\u00a0 Another term for it would be \u2018bundling\u2019.\u00a0 Wineries that have a successful item or two that people clamor for every year on their mailing list are now adding other products to peoples \u2018allocations\u2019 with the tacit understanding that the consumer is expected to take the entire offering.\u00a0 If they don\u2019t, it may adversely alter the amounts they are offered on the future.<\/p>\n
We\u2019re sure some of you have been in situations where your allotment letter of a particular in-demand, high dollar Cabernet comes and you note that the winery has also blessed you with a few bottles of their new $45 Sauvignon Blanc that they will tell you is very special, too.\u00a0 You may not even like<\/em> Sauvignon Blanc, but if you care about the Cabernet, the winery figures you\u2019ll pony up for the Sauv. Blanc as well.\u00a0 This is an aggressive tactic that takes FOMO (fear of missing out) and uses it to shoehorn more items into the consumers \u2018cart\u2019.<\/p>\n Hey, it happens out in the trade to some extent as well, though it is on the wane because, these days, there is simply too much great wine out there for a single winery to get away with it for very long.\u00a0 We hear from a lot of consumers who want to sell their multi-year verticals of the \u2018other wines they had to buy\u2019 in order to get the wines they really wanted.\u00a0 We stopped playing those games with suppliers decades ago but understand that people get super passionate about certain wines and will put up with a lot of silliness to get them.<\/p>\n The winery knows that, too.\u00a0\u00a0 If the winery is hot enough, they\u2019ll just figure if you don\u2019t want to play, someone else will.\u00a0 It seems to be accepted practice these days, particularly among some of the direct-to-consumer wine programs.\u00a0 We think the days of such things might be numbered.\u00a0 The power of the single critic to create an instant icon isn\u2019t what it used to be in the ‘print’ days, prices have soared on such wines to greatly reduce the potential demand, and we seriously doubt the next generation would respond to this kind of nonsense anyway.<\/p>\n Still, for whatever reason, people who make wine seem to believe it is their birthright to decide who can buy their wine.\u00a0 We\u2019ll go out on a limb and say that as much as vintners will try and tell you they allocate because they want to \u2018protect their brand\u2019 and \u2018insure the widest possible distribution\u2019, there\u2019s more than a little ego involved.\u00a0 Plus vintners would be indignant if you suggested to them that this process might create<\/em> some of the problems they seek to resolve.<\/p>\n A number of \u2018cult\u2019 California wines turn up at auction every year because people on the mailing list have created a nice little income supplement by reselling their allocations.\u00a0 The wines have become too expensive for normal people to drink, but there are some people out there willing to pay \u2018mad money\u2019 to get some of these items.\u00a0 So people on the \u2018mailing list\u2019 will continue to take their allocations because they don\u2019t want to lose them, and simply resell some or all of it.\u00a0 Allocating didn\u2019t solve that problem, it prolongs it.<\/p>\n “Wine, like water, will often flow to the place it is destined to be.”\u00a0<\/strong><\/span><\/p><\/blockquote>\n You have likely heard about the \u2018grey market\u2019 in certain higher end European wines.\u00a0 This market exists because <\/em>of the allocation process.\u00a0 We\u2019ll illustrate how it works with a curious American example that happened years ago.\u00a0 A certain sales manager of a famous California winery was bragging that he exported wines to 25 countries and was about to add a 26th<\/sup>.\u00a0 He was going to send 3 cases of his highest demand reserve Cabernet to Lichtenstein.\u00a0\u00a0 Could he have sold them here in a nano-second?\u00a0 Clearly.\u00a0 Does anyone in Lichtenstein care about this wines?\u00a0 He couldn\u2019t answer, but was going to do it anyway so he could add another pin to his map.<\/p>\n Now to illustrate how the \u2018grey market\u2019 works, let\u2019s use our Cabernet in Lichtenstein.\u00a0 Obviously the three cases are not enough to stimulate international trade, but it is the reason and mechanics we want to show. \u00a0So let\u2019s say the buyer in Lichtenstein has no idea what he is going to do with this big time California Cab, nor does he think he can sell it for enough to make it worth the effort.\u00a0 He will look around the world and see who is willing to pay a premium and perhaps try to sell it all in one shot to some other market, maybe even back to America if the price is right.\u00a0 The American winery guy still smugly has his 26th<\/sup> pin in the map, but it really didn\u2019t accomplish anything.<\/p>\n Wine, like water, will often flow to the place it is destined to be.\u00a0 Say some top notch Burgundy house has a relationship with a distributor in Switzerland, developed over the years because the winery felt it needed to be represented in that country among others.\u00a0 If there is enough profit, or an easier transaction to sell Switzerland\u2019s allocation out the \u2018back door\u2019 to another market, it will happen.\u00a0 The winery intended for this wine to be in Switzerland for lord-knows-what reason, but the mechanics of the marketplace will often prevail.<\/p>\n The winery\/domaine decided to allocate its wines in a certain way to various world markets to achieve some perceived marketing strategy and distribution.\u00a0 Why?\u00a0 Again, don\u2019t know.\u00a0 But the point is he isn\u2019t balancing supply and demand appropriately if the wines are being resold to other markets.\u00a0 So what did this \u2018allocation\u2019 do really?\u00a0 Clearly one or more of those markets didn\u2019t need<\/em> all they were given\u2026and what were they supposed to do with the wine?<\/p>\n It is one of the great mysteries why the wine industry spends so much time worrying about apportioning wines to entities who may not care at all about them.\u00a0 But it seems to be ingrained in the system, and we don\u2019t see that changing any time soon.\u00a0 If you ever wonder why our California section is more moderate these days, far too many wineries make it way more difficult than it needs to be to simply get products we\u2019d be interested in selling.\u00a0 Thankfully there is enough great wine in the world that such things as \u2018allocations,\u2019 and other such gamesmanship, really don\u2019t have the impact they used to because there are simply too many great choices, most of which don\u2019t have some sort of \u2018sales prevention\u2019 agenda.<\/p>\n","protected":false},"excerpt":{"rendered":" In our last \u2018dribblings\u2019 piece we talked about why allocations as a marketing strategy were created.\u00a0 Essentially it started as a way to apportion in demand goods to a wide range of customers, as well as a way for the seller to control the distribution patterns of his wines.\u00a0 Admittedly, the fact that wine is … Continue reading “ALLOCATIONS: A CONTINUATION”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":2103,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[39],"tags":[125,123,124,4,122],"_links":{"self":[{"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/posts\/2077"}],"collection":[{"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/comments?post=2077"}],"version-history":[{"count":6,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/posts\/2077\/revisions"}],"predecessor-version":[{"id":2107,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/posts\/2077\/revisions\/2107"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/media\/2103"}],"wp:attachment":[{"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/media?parent=2077"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/categories?post=2077"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.winex.com\/stockreport\/wp-json\/wp\/v2\/tags?post=2077"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}