Fine Wines: what they are, which consumers are interested and what their price range position communicates

The characteristics that define fine wines include objective quality, economic, environmental and social sustainability, prompting emotions and curiosity, and the idea that the producer wants to convey. So, who are the consumers that buy them and how can producers influence positioning their wines? The author, Pauline Vicard of the Areni Global Institute and the American business strategies consultant, Peter Yeung discussed the characteristics at the Wine2Wine 2022 Business Forum, on stage November 8th and 9th in Verona.Ettore Nicoletto and Andrea Lonardi, respectively, CEO and director at Bertani Domains mediated the discussion.
According to a study the ARENI Global Institute carried out in the United States, Great Britain, Hong Kong and China, the fine wines market is a niche market that involves minimum sales percentages both in Asia and in the Western world (7% in America, for instance). It also spans three different price ranges — the first (from 30 to 150.00 US dollars) is clearly accessible to more people than the two higher ranges (150-450.00 US dollars and over 450.00 US dollars). Demographically speaking, the market in the West attracts more men as well as younger consumers, under 44 years old. The reasons for purchasing fine wines remain the same (special events, gifts, investments). However, in the higher price ranges, of course, other factors come into play, such as wanting to feel unique and exclusive, and being able to access a low-production product (whether real or construed, it does not matter), be connoisseurs or particularly passionate, have high economic buying power, even for daily consumption, and finally, be collectors.
How can one access this market segment? According to Peter Yeung, the American finance, marketing and business strategy consultant, the 5 points that producers should consider when defining themselves, and therefore deciding in which price range to position themselves, are: the value they want to transmit; expectations in terms of quality; the reputation of the brand; relative quality compared to the context, and finally, the consumer's willingness to pay. In brief, it takes analysis and intuition. The most in-depth and meticulous analysis — described in the book Luxury Wine Marketing, written by Peter Yeung - will never be enough to make the right decision, because circumstances can change. Furthermore, it is important to be aware so as to adapt one's business (including limits and potential) to market fluctuations — for instance, in terms of consumer dictated trends, or the socio-economic conditions of the Countries where one wants to sell. To start out, it is important to know that the rules determining prices of commercial wines are different from fine wine prices. The base of consumers willing to buy them changes (high buying power is necessary), the weight of the brand changes (which means one brand cannot substitute another) and the reference market also changes (where marginal costs have less influence on defining the price). There is also a (fairly broad) price range of fine wines to keep in mind, which starts from the lowest base representing the affordable luxury of daily consumption (from 50 to 150.00 US dollars), then to daily consumption for the rich buyer (starting at 100 to 400.00 US dollars), to luxury wines for special occasions (from 200 to 999.00 US dollars), and next the iconic wines of famous brands (from 500 to more than 1000.00 US dollars), finishing with dream wines, which in addition to being produced by iconic brands, are also rare (more than 1000.00 US dollars). Considering these premises, quality must always be first and foremost as well as consistent and guaranteed over time. It has to be the fundamental substance that makes it possible to position one's wine at the levels desired.
The brand has to be strong and well-known, be supported in world rankings (including online), on the secondary market with an offer that goes beyond demand and gives a sense of scarcity or rarity, and the consumer’s must perceive it as a not easily replaceable product.
The context in which the company operates also has influence (and facilitates the construction of the brand). The territory it represents, or the cultivated vine, substantially affects the consumers’ perception of quality. It is therefore possible to define the price because it conveys a unique and non replaceable product. Looking farther, we can see that external influences including policies, economic conditions, the macro-diffusion of well-being and consequently buying power must definitely be taken into account. It is necessary to have both a short and long-term vision.Deciding when and how to raise the price of your wine is, indeed, essential. Increasing the price over a short period of time can disaffect regular customers, because you are moving from one consumer segment to another, betraying the loyalty of the previous one, while instead you are attracting the one you want to catch, unprepared. In a similar fashion, discounts can also have negative effects. Offering discounts can undermine the consumer’s perception of quality or also communicate sales difficulties. In any case, it associates the brand to a lower price category from which it is difficult to get out of and encourages the consumer to buy only during the sales period.
Time, constancy, scarcity, recognition (in terms of brand but also of territory) and reputation, are therefore, the building blocks on which consumers' choices are based. Wine producers must learn to focus on these as well as learning how to use tools that are not always immediate. In other words, learn to surround yourself with players who work in the fine wine market (distributors, communicators, etc.), push your own territory by spreading a healthy way of consuming wine (using sports, for instance, as a lever), build unique tools that allow you to get to know in depth the constant work of the company. All of this, while not losing sight of the markets or misleading ourselves that the growth of fine wine prices is guaranteed and stable, as it had been over the past few years.