A Note on Pricing
When I first began making wine in 2008, my goal was to make high-quality wines that were still approachable-- from a drinkability standpoint and a price standpoint. To over-deliver at my price point. That goal has never changed. The times, however, have changed since then. A lot.
I started this business in 2008, and until 2019 did not draw a paycheck. The business lost money every year, sometimes lots of it. This is not unusual for new wineries, especially those that begin organically like mine did. I didn't come into it with millions of dollars that needed a tax shelter, with huge corporate investors, with familial financial backing. I didn't inherit the business. I started it out of passion, with money I was earning by working another job, and with the support of my late wife Melanie, who also worked full time.
When Melanie died suddenly in 2019, I had to get serious. I had a son to raise, only 6 years old at the time. I had closed down my other business that was paying my bills-- sold to a deadbeat buyer who defaulted on the payments almost immediately-- and I needed to survive in the winery. To help with this, I hired a fulltime book keeper and general manager to help me right this ship and veer back towards shore after a long starboard list. We also saw some unbelievable support from our local community during that time. I'm pretty good at making wine, but I'm horrible about crossing the t's and dotting the i's in business. One of those creative types, I suppose. So I recognized that and brought in help.
My GM and I get together all the time to go over the nuts and bolts of this thing, and almost every time she begins with "you have got to raise your prices." And almost every time for 3 years now, I have resisted. She would bring comparative analysis, showing me the pricing of my peers, my history of quality reviews, etc... constantly with the objective of showing me that I was priced well below other peers who were at my level. Still, I resisted. See my goal, as stated in the first paragraph.
Then inflation hit.
While the cost of grapes had beem steadily rising for years, I had just been absorbing it. When I started out, it was not uncommon to get quality Pinot from some of these same vineyards I work with today at $2400 - $3000 per ton. Today those grapes cost $4200 per ton to $5500 per ton. I've been absorbing those increases for many years.
I used to use an American-made bottle supplier, but they shipped production overseas, cut production, and stopped servicing our area in 2014 and I had to change. My bottle supplier now is reliable, based in Santa Rosa (owned by a Portuguese company), gets me my bottles on time, and they have great uniformity and integrity. But, like 95% of the bottles sold in America today, they are made overseas and subject to tariffs that were implemented by the previous Presidential administration. There simply are no American-made suppliers that I've found who are taking new customers right now. The cost for these bottles has doubled in the last year+. And then there's a large tariff on top.
My corks used to cost 40¢ each. But I was seeing too much cork taint (rates have increased over the last 10 years), and in 2016 I switched over to a new program that individually tests every cork for the compounds that cause cork taint. This lowers the incidence of cork taint (theoretically) from 5% to .1%. In doing so, I also upgraded the quality of the cork to facilitate longer aging of the wines. I started out with using these only for Pinot, but in 2020 began using them for Chardonnay and Syrah too. The cost of my corks has more than doubled. Thankfully, I abandoned the use of foils long ago-- because they just end up in landfills, and I wanted to put the money into a better cork. So at least that cost isn't an issue. Because they are WAY more expensive now.
My label printing company now has minimum orders, because of the demand Covid caused on labeling, among other things. And paper costs have risen. I now pay a premium if I order small lots of labels. Since my wines are all small-lot wines, this became an issue.
And every time I need a barrel, bottles delivered or finished wine shipped out, we have trucking and delivery services. Trucking rates have almost tripled in the last 18 months in many cases. UPS rates have risen. Shipping of barrels from France to America and shipping of barrels from the ports to Santa Cruz have all increased almost exponentially.
The end result of all of this is that we've had to play catch-up with regard to the pricing of the wines, lest we degrade quality. Degrading quality to stay at some arbitrary price point is not an option for me. I'd rather quit making wine. Some may have noticed a small increase with the 2020 vintage, and you will also see a small increase with the 2021s. The purpose of this blog post is to show you the reasons. It's not greed, it's the state of the world's economy. Yes, I do finally get a paycheck for my work here. And no, it's not a big one. And it's not increasing. Do I pay my staff well? Yes. Recent snooping shows that I pay more than most of my colleagues. But that's not going to me. It's going to hard-working people, whose smiling faces you see regularly in my tasting rooms and at events.
Inflation is biting us all in the butt. I have absorbed it as long as I could, because I love making wine and sharing it with you, and I really don't want it to be cost-prohibitive for you all to enjoy the fruits of my labor.
Posted with love,
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