Should Winemakers Consider Private Label?
In recent years, private label products have increased in popularity with the general public. Private label products are those which have been created specifically for, and in some cases by, retailers – for example, Amazon-branded household products – to be sold exclusively via one sales channel.
With the ease of being able to search through reviews and prices across dozens of different merchants, consumers are doing their homework and know that saving a few dollars doesn’t mean sacrificing quality any more, especially with regard to wine.
The majority of private label wines used to be thought of as lower quality, but those assumptions are quickly changing with the rapid innovation of recent winemakers and retailers. Private labels are now producing premium wine brands, that are high-quality but still save consumers a bit of cash, like Whole Foods Wine Farmer label.
Private label wines have also been gaining attention by winning medals at wine competitions stretching around the globe. With this in mind, winemakers are now warming to the idea of pairing with a retailer to create a private label product.
What are the Benefits of Pairing with a Retailer?
Retailers create inherent trust with their customers through their private label products. For example, Costco’s well-known private label brand, Kirkland, is respected amongst consumers for being high quality and reasonably priced. Consumers don’t need to worry about the quality of the wine they’re getting from a private label because the retailer has already established product trust from consistency in their product lines.
Retailers can also offer winemakers a large audience that they may not be able to reach otherwise. For many retail consumers, price is a determining factor in their ultimate selections. The idea of buying a consistent quality wine at a lower cost due to a private label brand is especially appealing to this segment of a retailer’s audience. Pairing with a retailer allows a winemaker to get in front of price-conscious consumers who may not otherwise explore your products.
As part of reaching a new segment, private label wines provide the opportunity for new customers to look for your brand’s wines, and where permitted purchase directly from your winery. Remember that consumers are research-heavy, which means once they have developed a taste for a winemaker’s private label wine, they’ll likely learn about the winemaker behind the product and explore other offerings in the hopes of finding another wine they’ll enjoy. In this way, pairing with a retailer can set up winemakers with brand ambassadors for essentially the cost of production.
Speaking of which, marketing is a significant cost that winemakers need not worry about when they pair with a retailer. Where marketing costs would normally eat up a large chunk of profit, winemakers can expect higher margins even for a wine that is at a lower price point. Ultimately, this means more profit without any of the typical promotional costs.
Finally, winemakers should consider pairing with a retailer especially in the case where they have an overabundance of wine. Each season provides varying conditions and the amount of wine produced can fluctuate greatly. Winemakers who pair with a retailer are better positioned to sell excess wine that may normally take up space.
Pairing with a retailer can be the start of a great business relationship and provide new, profitable avenues. As with any aspect of expansion, consider all sides of a potential new relationship to determine if it’s right for your business. Lastly, regulations on private labels and restrictions in such agreements with retailers vary by state. The private label opportunity does not otherwise provide an avenue for circumventing trade practice and tied-house laws that prevent common ownership across different industry tiers.