Rombauer Vineyards shows how luxury wine can raise prices in discount world | North Bay Business Journal

“We weren’t focused on the next new fad on developing styles,” he said. “We were focused on varietal purity, making the purest expressions of any variety we were involved with and polishing them every year. That focus helped us become known as a very reliable, committed, serious provider of wines at a favorable price for the quality.”

The stalwart pricing strategy for Rombauer wines amid the pressure for discounting during the Great Recession came out of planning. In 2008–2009, it became challenging to sell high-priced wines, and owners of notable brands started moving inventory by methods such as flash sales and relabeling as lower-priced retailer private labels.

Though sales growth largely returned for luxury wine producers in the North Coast a few years after, the pressure from retailers and wholesalers against moving up pricing has been a lingering challenge. That pressure has been building, with increasing costs of grapes and labor plus the entry of more vintners into faster-selling higher-priced segments.

Amazingly, Rombauer sales grew slightly during the Great Recession, even without resorting to discounting and special trade-channel programs to move inventory.

“We’ve never been focused on growth for growth’s sake,” Knebel said. “We’ve been chasing demand since the mid-’90s. We’ve grown very carefully.”

Growth has been controlled by keeping production behind the demand curve and being able to throttle output to avoid an inventory surplus that would increase pressure to discount.

“When you do that, you start down the road toward commoditization,” Knebel said. “You slide into a category where you look like others that manage volume growth by pricing and incentives. That we just won’t do.”

Rombauer production now is eight times what it was in 1998, but it has been steady growth each year. As long as it fit the quality targets, Rombauer would invest in more advanced process management, vineyard development and purchase of quality fruit outside the estate acreage to increase volume. Attention to the early years of vines can help turn what normally would be a 25-year life for a vineyard into a 50-year vineyard, Knebel said.

Currently, half of the grapes going into Rombauer wines are from the estate vineyards. Most of the rest is from long-term purchase contracts for grapes grown in Los Carneros, Napa Valley and Sierra Foothills appellations, with the latter supplying most of the vintner’s zinfandel fruit.

The wine business has been facing significant upward movement in recent years in the price of North Coast grapes, particularly for hot-selling Napa Valley cabernet sauvignon.

Last year, the average price for Napa County’s top winegrape blew through $7,000-a-ton for the first time, jumping 9.78 percent from 2016. About 66,733 tons of Napa County cab were harvested from 20,953 acres and sold at an average price of $7,498 per ton, according to the Napa County Agricultural Commissioner’s Office. The average price for Napa cab in 2017 was nearly 17 percent above the five-year average, per analysis of California Grape Crush Report data.

The rise in costs has led Rombauer to raise prices in recent years, but pricing continues to be in the mid-point for the peer group for certain wines, Knebel said.

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Rombauer Vineyards shows how luxury wine can raise prices in discount world.