Take a moment to think about the ballpark prices of alcohol. Do you know how much a bottle of Meiomi Pinot Noir should cost? A handle of Ketel One Vodka? A 12 pack of Coors Light? Were your answers around $20, $40, and $10?
Now, how much should a bottle of Ideology Chardonnay cost? You probably have no idea. You've probably never heard of it. Or better yet, your customers have never heard of it. This 2014 Chardonnay from Napa Valley, with beautiful packaging, is available in your store only. Your customers can't go compare the price of this wine at Costco, or Target, or Walmart. So you add a 50% margin, retail it for $20 a bottle, and sell out in two weeks.
Ladies and gentlemen, welcome to blind price wines.
Price comparison is killing retail (and restaurants)
As distributors continue to consolidate, they're dropping small producers and focusing on the big players. Why? To please large retailers. Retailers are reliant on large suppliers such as Constellation or Gallo because they can fulfill retailers' needs in hundreds of locations. Large retailers need uniformity in their product selections. The only brands who can provide that are those who produce an incredible amount of volume. This leads to every major retailer carrying many of the same wines, thus entering them into price wars. Consumers are then able to price compare the cost of any given wine at multiple stores, leading consumers to know how much every wine is 'worth'.
For example, in the Midwest Costco is retailing Ketel One Vodka for $25.99 per 1.75 L bottle. At Hy-Vee (a Midwest grocery store chain with over 240 locations), a 1.75 L bottle of Ketel One Vodka is retailing for $39.99. Think about that for a moment. Hy-Vee has buying power! Yet their retail price is still a whole $14.00 more per bottle.
Why would a customer buy alcohol at Hy-Vee? Or at an independent liquor store? Why would a customer drink wine at a local bar or restaurant when they could by a bottle at Target for the same price of a glass at a restaurant?
When everyone asks, "Why are the local liquor stores closing?! Why aren't people buying wine in restaurants anymore?", it's in part thanks to a lack of blind price products. These businesses are price competing with big retailers, and don't have the buying power to be doing so.
The large retailers' weakness is the small retailers' strength
Smaller accounts have to find a competitive advantage against big retailers; and many are turning to blind price wines. So, what exactly is a 'blind price wine'? A blind price wine is one that consumers cannot immediately price compare. They don't know the ballpark price for that wine, and they can't find it in other nearby locations. Earlier you thought about how much a bottle of Ideology Chardonnay should cost. You were on the spot, just as a consumer would be in a store or restaurant.
2014 Ideology Blondie Chardonnay Napa Valley California
This is a blind price wine. Consumers can't go compare the price of this wine at Costco, Target, or Walmart. Frequently these types of wines aren't offered by any other retailers in the whole state. So, what does a local bottle shop do? They add a 50% margin and sell out in two weeks. This is where smaller accounts have competitive advantage over the big guys. In their flexibility.
Small accounts aren't limited by volume. They can buy from boutique wineries because they don't need tons of inventory. The market of blind price wines is completely open to small accounts. Thanks to their ability to carry niche products and set their own prices, they aren't bound by the prices their competitors are offering. This allows smaller accounts to decide their own profit margins - i.e. make more money.
Speaking of profit margins, the wholesale case price of the Ideology Chardonnay from before is $126 a case. If an account buys it at wholesale for $126 and retails it for $20 a bottle, they'll make a 48% profit margin. Retail it at $25 a bottle and their profit margins jump to 58%. This is a Napa Valley Chardonnay we're talking about people! 58% margins! Smaller brands - blind price brands - are where the big profit margins are made.
The new frontier of wholesale wine
At this point you're probably saying, "That's all fine and dandy, but Ideology Chardonnay isn't offered by any distributors in my state," and you'd be right. You would also be very uninspired (no offense). Do you think Total Wine & More only buys products offered on their in-state distributors books? Absolutely not.
Consider this; of the 8,000 wines carried by Total Wine & More 2,000 of them were sourced winery-direct, many of which are brand exclusives. This means that Total Wine & More has brought in 2,000 different wines directly from wineries to capitalize on blind pricing. How is that working for them? Total Wine & More is projected to make $3 Billion in 2019. You may be asking yourself; how is Total Wine & More getting all these products? How are they legally buying them if not from distributors books?
Excellent question. Total Wine & More buys wholesale wine using the winery-direct model. In this model Total Wine & More sources the wines they like, create purchase orders directly with the suppliers, and have in-state distributors clear the sale. These wines are not carried in the distributors' 'portfolios'. Instead the distributor simply takes title of the wine as it enters the state and files the necessary paperwork.
Using this method the sky is the limit on the various 'blind' products retailers can bring in. Smaller retailers can utilize niche producers to make profits in the same way large retailers have to create private labels.
A Winery Direct Offering From Total Wine & More
How you can add them to your inventory
Many retail and restaurant groups have began creating alliances in the United States to buy wholesale wine using the winery-direct method. If you're interested in purchasing winery-direct and bringing in blind price wines, you should consider joining an alliance or using Merchant23.com.
Merchant23 is an online trade platform created for wineries, retailers, and restaurants. Through a network of clearing distributors in 48 states, Merchant23 enables any winery, retailer, or restaurant to sell or buy wholesale wine using the winery-direct model. As a 'Buyer' you can browse wholesale wines offered in the Merchant23 'Marketplace' and create instant purchase orders. Or, if there's a wine you've always wanted to bring in, but doesn't have distribution in your state, Merchant23.com can now get it to you cleared and compliant in the three-tier system.
Blind price wines are the future of 2018. They're how niche producers sell their products into new markets. They're how small retailers and restaurants find their competitive advantage. But most importantly, blind price wines are how the right products get into the hands of the right consumers, and that makes everyone happy.