Transcripts
I am super excited to have a very special guest on the show.
Speaker:I have with me Ruchira Neotia.
Speaker:Welcome, Ruchira.
Speaker:Thank you.
Speaker:Thank you, Janene.
Speaker:I am absolutely chuffed.
Speaker:This is such an interesting topic and an interesting audience.
Speaker:Why don't we get started with a couple of rapid fire questions.
Speaker:First of all, where are you joining us from today?
Speaker:I'm in London today.
Speaker:England, not Canada.
Speaker:Oh, is there a London?
Speaker:Oh, yeah, there is a London in Canada.
Speaker:That's true.
Speaker:How would you describe your superpower?
Speaker:alcohol is my passion.
Speaker:So, I have a pretty intuitive and informed palate.
Speaker:I can match a relevant drink to anything.
Speaker:This includes my book club.
Speaker:So I told people, even if you set a book in Mars, I can pair a drink to that.
Speaker:So yeah, that's my superpower.
Speaker:Wow.
Speaker:That's amazing.
Speaker:I always find it really interesting when people can taste and smell
Speaker:things at a level other people can't.
Speaker:what's the one interesting thing that most people don't know about
Speaker:you that you'd like to share with us?
Speaker:Ooh.
Speaker:I once co piloted a plane from London to Duxford Airfield
Speaker:Museum wearing a Chewbacca mask.
Speaker:I'm a big Star Wars fan.
Speaker:And, I was training for a private pilot's license.
Speaker:Okay.
Speaker:I was going to say, there's a whole lot to unpack in that one short statement.
Speaker:Why?
Speaker:He was the best co pilot in the history of time.
Speaker:I mean, come on, Chewbacca.
Speaker:It was going to be an effective co pilot.
Speaker:Yeah.
Speaker:That's funny.
Speaker:Okay.
Speaker:Now, why don't you share with us a little bit about.
Speaker:What your business offers and what you do.
Speaker:I'm a wine and spirits in a sake consultant.
Speaker:What I bring to the table aside from my mind by understanding my news and
Speaker:the alcohol industry is tailoring my offerings to, the person, the
Speaker:client and the business objectives.
Speaker:And it's not just about the product and my knowledge and my own arrogance or hubris.
Speaker:So for example, you know, I design, drinks lists for restaurants
Speaker:and, they end up sort of achieving two, three X in beverage sales.
Speaker:Because of the perfect fit between food and wine and spritz, as the case might be.
Speaker:And then again, creating incredibly entertaining experiences for
Speaker:corporate tastings, private events.
Speaker:But just, you know, if you want to build a cellar, if you want to, you know, run an
Speaker:amazing event virtually or otherwise, or if you've got a great restaurant who kind
Speaker:of needs somebody to help them with their offerings, I'm the person to talk to.
Speaker:Okay, excellent.
Speaker:And how did you get into this?
Speaker:It's one of those weird things in life.
Speaker:I've been a bit of a nerd with alcohol, so I've done every qualification there
Speaker:was, and it is pretty tough, right?
Speaker:So when you're holding down a full on corporate job and re
Speaker:orchestrating orgs and then you sort of lean too far into your hobby,
Speaker:and then you sort of fall into it.
Speaker:And that's what happened to me.
Speaker:Once I got a taste of this, earlier this year, it was a little hard to
Speaker:sort of extract myself and I'm kind of giving it, giving myself a run at it.
Speaker:So this is how I ended up falling into this industry.
Speaker:Lean too far into my hobby.
Speaker:. Well, that's great.
Speaker:Most people would love to have a job that is something that they're that
Speaker:passionate about and love that much.
Speaker:Congratulations on being able to achieve that
Speaker:. Yeah.
Speaker:I'd like to start this conversation because there's a lot that goes
Speaker:into getting to the final price that you pay for a bottle of
Speaker:wine or gin or whatever it is.
Speaker:Can you tell us a little bit about what that process looks like
Speaker:and how that might influence the pricing that we see in the end?
Speaker:Here's the thing, right?
Speaker:Before I got into this industry, we all have like a very
Speaker:romantic idea about a drink.
Speaker:We all lap it up, you know, the great advertising, the lifestyle,
Speaker:it's a very romantic idea.
Speaker:It is bloody hard work.
Speaker:I mean, it's like blood, sweat, and tears.
Speaker:So when you're sort of looking at the cost journey, there is
Speaker:a whole heap of factors, right?
Speaker:But the biggest price point in any bottle is actually the tax man.
Speaker:When you're sort of looking at a bottle of wine, at the very, you know, so
Speaker:UK is a very price sensitive market.
Speaker:When you're looking at a price point on a wine, so like I said, you know,
Speaker:five pounds 50 in a supermarket, about 60% of that is tax duty is 2.67 pounds.
Speaker:That's flat.
Speaker:And then on top of that, you have 20 percent VAT.
Speaker:Then you've sort of got, you know, your labeling cost, your bottle.
Speaker:So bottle glass became extremely expensive, you know, post COVID.
Speaker:And there was a roll sort of glass, 40 percent more expensive.
Speaker:Right?
Speaker:So then you just look at a glass bottle, the price for that, the labeling,
Speaker:transport and handling, depending on how the wine was made, but it would store
Speaker:a single barrel, just an empty wooden French barrel costs 700 to 800 euros.
Speaker:And that contains about, you know, 200 bottles worth of wine.
Speaker:Then you sort of have transport and logistics.
Speaker:Then you've sort of got your, um, supermarket or your retailers or
Speaker:your trade restaurants margins.
Speaker:Since we're talking about supermarket example, I'm gonna give you a
Speaker:very, very tactical example here.
Speaker:I'm gonna run some math, right?
Speaker:Five pounds 50, 2.67, duty 20% VAT is about, I think circa 90.
Speaker:Depends.
Speaker:So that is over 60% of your cost packaging, as I
Speaker:discussed, close to a pound.
Speaker:Then let's say logistics is about 0.
Speaker:30. And then if we kind of assuming the retailer's margin between
Speaker:20 to 30%, it's like 80 pence.
Speaker:So there's 21 pence worth of wine.
Speaker:In a bottle that you pick up this five pounds, 50,
Speaker:five.
Speaker:Wow.
Speaker:That's incredible.
Speaker:Right?
Speaker:I mean, that's just, that's mind blowing.
Speaker:And I think, I mean, at least we're talking about if we're
Speaker:looking at the costs here, right?
Speaker:The costs involved in producing it.
Speaker:I think a lot of people, I always joke with my clients that when they're focused
Speaker:on the cost of things as the basis on the sole basis for what they charge.
Speaker:We always joke about that's not what the customer is paying attention to.
Speaker:Yeah.
Speaker:And that when they're making a purchase, they're paying attention to what they
Speaker:think they're going to get out of it, but they're not necessarily paying
Speaker:attention to, they're not calculating the costs to produce it and bring it to you.
Speaker:If they were, it would take them a long time to purchase any,
Speaker:every little thing they buy.
Speaker:Right.
Speaker:So it's really important here for people to.
Speaker:I think to realize that the cost is an important part of understanding
Speaker:what to charge, because you need to understand how profitable you
Speaker:can be and whether or not that's profitable enough for your business.
Speaker:But the fact that 20 pence, 20 pence or 40 pence, out of a five
Speaker:pound, approximately five pound bottle of wine, that's like peanuts.
Speaker:What's interesting is as you start sort of going up in the
Speaker:scale, just a tiny bit, that ratio starts to exponentially increase.
Speaker:And specifically for the wine, right?
Speaker:Because some things will stay the same.
Speaker:Since the duty is flat, the VAT will shift.
Speaker:Transport will relatively be the same.
Speaker:Packaging, mas o menos a little bit.
Speaker:But so, so say if you're looking at a 10 quid bottle of wine, you kind
Speaker:of end up with about two pounds worth of wine in that instead of 21 pence.
Speaker:So you, so it's just costing you double.
Speaker:The quality of wine you're getting is 10x, then when you're sort of
Speaker:going to 20 pounds, the quality of wine you end up getting in the
Speaker:bottle is worth about 31 times more.
Speaker:The increased cost is Forex, so it is a very disproportionate increase.
Speaker:Right?
Speaker:So I think every pound that you spend from eight pounds to especially 20 pounds.
Speaker:it kind of goes exponentially towards the quality of the wine in your bottle.
Speaker:Now again, you know, there are other factors at play, but this is
Speaker:a very good general rule of that.
Speaker:I'm not talking about affordability here, so we're not gonna get into whether
Speaker:person can afford five pounds, 50 or 20.
Speaker:I'm kind of about the value.
Speaker:If you're looking for value for money now, after this particular threshold,
Speaker:obviously over 50 GBP things start to shift a bit because brand comes into
Speaker:play, how you're making certain things, and then there is how long is a piece
Speaker:of string, but I would probably say the biggest aha moment for anybody thinking
Speaker:about wine is by and large, if you can afford a bottle of wine that costs 12
Speaker:pounds, you can afford a bottle of wine that costs 15 pounds, but that extra
Speaker:three pounds that you pay in that.
Speaker:It's probably going to go pretty much all against the quality
Speaker:of the wine in the bottle.
Speaker:Interesting.
Speaker:And is that true for wines that come more or less from anywhere globally?
Speaker:Or is there a different geographically?
Speaker:Transport can get quite interesting, right?
Speaker:So it can get quite complicated, but generally when people are importing.
Speaker:You end up importing in sufficient quantity in bulk, so you kind
Speaker:of do the math on that to keep that relatively stable.
Speaker:So yes, there should be a little bit of a differential, but it's
Speaker:actually more on import duty.
Speaker:That makes a huge difference between where you importing from because for
Speaker:example, American wine is so expensive in America that you will see that in the uk.
Speaker:You find very few instances of that.
Speaker:on basic shelves, maybe very at the top end, but even there, it's a little
Speaker:bit lower because our, you know, duty relationships are much harder there,
Speaker:whereas with, you know, when we were part of the EU, when pre Brexit,
Speaker:that was a very different ballgame.
Speaker:Cause you could literally be importing from anywhere in the EU,
Speaker:which was very, very different.
Speaker:Then there's labor costs, right?
Speaker:So for example, why is South African wine such great money, you know, and
Speaker:again, I'm taking into consideration vineyards where people are so
Speaker:paid decently, but labor is cheap.
Speaker:So the quality ratio to that versus producing wine, okay.
Speaker:For example, like British wine, it can never be cheap.
Speaker:Because it's really expensive to produce it here in the U. S., everything is exact.
Speaker:So you would think, right, you're going to go buy a bottle of wine down my country
Speaker:lane in Sussex or something like that.
Speaker:I'm in London, but, you know, if I was in the country.
Speaker:You would still kind of buy a more inexpensive bottle of wine from South
Speaker:Africa or from Chile because it's the volumes that sort of offset it.
Speaker:Right, right.
Speaker:Well, that's interesting.
Speaker:So in my earlier days, I worked for a company who is in agriculture.
Speaker:And one of the things that we did was we went and visited wine producers
Speaker:and Prosecco producers in Italy.
Speaker:And I remember Being the wine producer, well, one of them that we
Speaker:visited, it was very specific at the amarone, which is a lovely red wine.
Speaker:I love it so nice, but it's produced in a very particular way.
Speaker:And I would guess that that also has an influence, not just on the price, but
Speaker:then also on the quality of the wine.
Speaker:Oh, absolutely.
Speaker:I mean, to make an Amarone is a multi step process because first of all,
Speaker:you know, just in general, I think the one thing that people kind of
Speaker:need to bear in mind when it comes to wine, it's an agricultural product.
Speaker:So, you know, grapes are grapes.
Speaker:You can't manufacture them.
Speaker:Like they have to grow.
Speaker:And it's beholden to the vagaries of nature, right?
Speaker:And it takes, when someone starts a vineyard, my understanding is
Speaker:it takes seven years before you have the first usable crop, right?
Speaker:So really.
Speaker:In certain regions.
Speaker:That will not allow you to do anything before, you know, you can go make tea
Speaker:brandy with it, but that's about it.
Speaker:Yep.
Speaker:So it takes about minimum seven years before you can establish a vineyard.
Speaker:And then after 20 years, the yield for vine starts to lower because
Speaker:the vines are getting older.
Speaker:Fruit is concentrated.
Speaker:Yes.
Speaker:But, you know, again, when you're sort of thinking about the costs here,
Speaker:there's a lot that goes into the bottle.
Speaker:Then when you use the example of Amarone, my God, delightful wine.
Speaker:But I'll just give you an example of how much work that goes into that.
Speaker:You just, you know, with traditional wines, you pick the wines, uh, sorry,
Speaker:you pick the grapes, choose to de stem, not crush it, press it, ferment
Speaker:it, either store it or bottle it straight, depending on how you want
Speaker:to sort of, you know, run with it.
Speaker:With Amarone, there is no cutting corners.
Speaker:To call it an Amarone, You have to dry the grapes.
Speaker:Some people choose to dry it.
Speaker:Like, you know, they chop it up, dry it on the wood.
Speaker:So the grapes have to be raisined and then you have to crush the raisins
Speaker:cause you can't press them cause there's no real juice and they have dried in
Speaker:rooms to kind of make that happen.
Speaker:There's special rooms.
Speaker:Then you take these crushed grapes and soak it in some new wine that
Speaker:was made with some of the grapes and then you kind of, you know, you
Speaker:have to age them in certain barrels.
Speaker:I mean, it is a romantic process to see the kind of grapes.
Speaker:It is magical.
Speaker:But it is very hard work.
Speaker:And then you sort of go, well, I want an Amarone for five quid.
Speaker:I mean, like, I'm sorry, but somebody is not getting paid.
Speaker:And that probably isn't Amarone in your bottle.
Speaker:there's a lot that goes behind your everyday wines, but a lot of
Speaker:times, not always, but many times for the more expensive wines, there
Speaker:is something very particular that's going on that impacts it even more.
Speaker:But what's interesting, if it's only, a few pounds of the total,
Speaker:then I would guess also what a lot of what people are paying for is
Speaker:more perceived value in the wines.
Speaker:Is that also.
Speaker:That is correct.
Speaker:And I think especially after a certain price point, because the market is very
Speaker:competitive in between 10 and 20 quid.
Speaker:But after that.
Speaker:If you want the customer's dollars or pounds as we're in this
Speaker:country, it's about the brand.
Speaker:So even for example, you know, when you get into the wine industry and
Speaker:I find this amazing little producer in you know, let's go with that.
Speaker:And I'm a Amarone producer in Italy who's making literally like 200 bottles of wine.
Speaker:Now to import that, just that small, tiny quantity, it's going to cost me a
Speaker:fortune because it doesn't sort of take into account shipping, volumes, et cetera.
Speaker:And then if that producer is completely unknown, it costs this producer quite
Speaker:a lot of money to make that wine.
Speaker:Nobody in the UK knows about it.
Speaker:So if I go sell that to a restaurant, the restaurant guy is like, you're
Speaker:my friend, you're sure I love you.
Speaker:And I know you have great taste, but you're trying to sell me this bottle
Speaker:of wine that nobody's ever heard of.
Speaker:I know it tastes good, but it costs 40 pounds.
Speaker:So that means I'll have to put it on the list.
Speaker:Traditionally in the UK, it'd be three X. You know, 120 pounds, like
Speaker:there is a very known producer making great wine, much larger quantity,
Speaker:which I'm able to get at 25 pounds.
Speaker:So how do I justify that?
Speaker:Right.
Speaker:So it's quite complex and, you know, so, and then brand will pay a huge amount.
Speaker:So initially, when somebody is entering a market like the
Speaker:UK, I always tell them that.
Speaker:Because it's a price sensitive market, think about establishing and
Speaker:investing in your brand first, getting yourself know, become covetable.
Speaker:And this is specifically at the top.
Speaker:And I'm not talking about value wines here.
Speaker:And that's when you sort of tap into this cultish behavior and people who
Speaker:are crazy about a particular flavor and that you can detect, you know,
Speaker:these would be collectors like me, people who can sort of probably.
Speaker:Where the money is, in a way is worth it because you can make out the
Speaker:difference between and then you're just like, because I want to have X wine.
Speaker:Cause I know what's going to taste like this and it's
Speaker:impossible to get my hands on it.
Speaker:I'm obsessing over it.
Speaker:I will spend a hundred pounds, like no bother because that's, that's my producer.
Speaker:And it becomes, it's, it becomes emotional.
Speaker:So At the top end, when you sort of start crossing that 20 quid threshold
Speaker:and starting to go up, there is an emotional price before that it's a price
Speaker:after that it's an emotional price, which works, I think, very similar
Speaker:to products in the luxury industry.
Speaker:Interesting.
Speaker:So I'm curious, because you said something in there and kind of ran by it.
Speaker:So you said, You know, like for a restaurant, they're going to pay
Speaker:a certain amount to get that wine and then they're going to put it on
Speaker:their price list at somewhere else.
Speaker:Can you share a little bit more with us about, you know, what goes
Speaker:into that thinking and, you know, I mean, most of us, when we look at
Speaker:a wine list, we're like, well, we don't want to pay the most expensive.
Speaker:We don't want to pay the lowest.
Speaker:So we'll take the thing in the middle.
Speaker:Right.
Speaker:So, you know, I will say this, this is something, I think the trends are
Speaker:starting to change, but I wish fact how the majority of Europe handles pricing
Speaker:in restaurants, specifically France, specifically Austria, and maybe Germany,
Speaker:but let's kind of stick with France, Austria, Germany, Italy, Spain, you know,
Speaker:these guys over there, they tend to sort of balance out the margins, the way they
Speaker:sort of price the food in a restaurant.
Speaker:So, you know, people are having a good eating experience.
Speaker:You're going to have a good drinking experience.
Speaker:You, you sort of get more value for money.
Speaker:Now, for whatever reason in the UK and this sort of, you know, goes back, a
Speaker:ways, I don't know how long back to, but general rule of thumb, at least in the
Speaker:United Kingdom is retail price three X.
Speaker:Okay.
Speaker:So if you're able to buy a bottle of wine for 20 pounds in a wine shop and
Speaker:find that in a restaurant, chances are it'll be listed for 60 pounds.
Speaker:Okay.
Speaker:Wow.
Speaker:It's just.
Speaker:So then you start to kind of go, and then what happens is at the cheaper
Speaker:end, the margin will be even higher and at the more expensive end, they
Speaker:do sort of tend to shrink it a bit.
Speaker:Now, personally.
Speaker:I disagree with this and I, there is a movement now because when you
Speaker:start thinking about it, you go to great fine dining restaurants and then
Speaker:you're starting to make decisions.
Speaker:You know, you're eating great food, you made the decision.
Speaker:I'm going to go in, I'm going to spend X amount of money on food.
Speaker:I'm going to have like some great experiences.
Speaker:Then when you start looking at the drinks list and then you start to make
Speaker:as you, the exact thing that you said, don't want to buy the most expensive,
Speaker:don't want to buy the cheapest, but then you start to value your list.
Speaker:On the basis of price.
Speaker:'cause you're kind of thinking, you know, where am I not
Speaker:getting short circuited here?
Speaker:Right, right, right.
Speaker:And that's I think, what needs to shift.
Speaker:'cause you don't look at that and think about that when
Speaker:you are looking at the food.
Speaker:You're not trying to, you know, look at that and where is that margin.
Speaker:So I think to kind of bring that closer and work more on volume because in the
Speaker:UK they tend to shift more wine at the cheaper ends, making higher margins.
Speaker:That they do in the more expensive wines, but then I think, you know, it
Speaker:ends up in many instances creating a lack of balance between the quality of
Speaker:food you're eating and then the quality of the wine or the alcohol you're
Speaker:sort of consuming along with that.
Speaker:What I did with my restaurant, and I think I have to say, I'm a bit more inspired by
Speaker:Europe in that, that, when I was asked to sort of design the drinks experience for
Speaker:Dutch Healing Express, I was of a concept.
Speaker:For this restaurant, all female kitchen, the only one of its kind in the world.
Speaker:They're not trained chefs, they're housewives.
Speaker:Hmm.
Speaker:And she's like a, you know, global superstar.
Speaker:She's on Netflix.
Speaker:First British chef to be fa featured on Netflix is chef table.
Speaker:Okay.
Speaker:So I said I wanna bring, she's very generous with the ethos of her dining.
Speaker:So I said, the way I wanna price it is I'm actually gonna
Speaker:put everything by the glass.
Speaker:You get decent margins there, but people have a great choice.
Speaker:But it's gonna be a tight, condensed list Now instead of creating a compendium
Speaker:because that's you know, all you end up being is like you're sitting with
Speaker:friends You don't want to go through an entire Bible and I'm a wine that even
Speaker:I'm not gonna do that I'm like, where's the song I need recommendations here.
Speaker:Restaurant with no songs and I want to interact with people I
Speaker:want People to have done the work and help make a tighter selection.
Speaker:You have a tighter selection that allows you to have better bargaining,
Speaker:wouldn't say bargaining power, but you, you're able to kind of avail of more
Speaker:volume pricing from your wholesaler.
Speaker:And then when you're selling more of the good stuff, even if it's a
Speaker:lower margin, so my margins are much lower, you know, they're up to like 1.
Speaker:75 to two X maximum.
Speaker:I end up selling more of the better stuff, giving people a better experience.
Speaker:So you end up actually increasing your beverage sales by three,
Speaker:three X for the entire restaurant.
Speaker:Because what happens is just in this instance, let's say if my cheapest
Speaker:wine, I'm buying it for 10 pounds, I've listed it on the restaurant.
Speaker:I'm making it up like, you know, traditionally anybody
Speaker:would have done that.
Speaker:They have listed it for 40.
Speaker:That's not saying what I'm doing in my restaurant, but that's what happens.
Speaker:If you were to flip that and then say, actually, I'm going to list an
Speaker:incredible champagne on my list for 70 pounds that cost me 30 to buy it.
Speaker:You just see, it's barely like.
Speaker:Two X there, but you're still making 40 pounds, which is more than what you
Speaker:would made on that cheapest bottle.
Speaker:And if you're a discerning consumer and you want to have a good
Speaker:experience, you're just like, well, I'm not going to buy the 40 quid.
Speaker:Like I'm going to spend 60 on it.
Speaker:And maybe I'm comfortable spending the 70 because I don't
Speaker:feel like I'm being fleeced.
Speaker:Right, right, right.
Speaker:It influences behavior.
Speaker:Yes, and I think it makes a huge difference.
Speaker:That's why you actually sell better.
Speaker:People drink better.
Speaker:They have a much better experience.
Speaker:And it's a win win.
Speaker:I think in this instance, I'm like, you know what?
Speaker:Yes, there's margins.
Speaker:And then yes, you could throw math at me, but you forget that there is food and
Speaker:drink is about the ultimate experience.
Speaker:Watch that.
Speaker:It's not just about this industry.
Speaker:You know, I'm a marketer by trade, right?
Speaker:You look at consumer marketing anywhere.
Speaker:It's always about what is the end consumer experience and how
Speaker:people will spend, like, what's the value that you're getting.
Speaker:When you're looking at a wine list, you're not thinking about things like.
Speaker:Don't want the cheapest, don't want the most expensive because I think
Speaker:I'm getting fleeced on those things.
Speaker:That's not the thought you want to be having.
Speaker:You want to be kind of looking at it and sort of going, what
Speaker:do I feel like drinking today?
Speaker:And what's my budget?
Speaker:That's the conversation you need to be having with yourself.
Speaker:My budget is I'm willing to spend about 50 quid or 60 quid or 40
Speaker:quid, whatever the case might be.
Speaker:What's my best bet on this list that works in the flavor profile that I want.
Speaker:Fascinating.
Speaker:I love it.
Speaker:So I'm curious about something.
Speaker:So of course, I'm gonna stick with wines for a moment, but I do have
Speaker:a couple questions on spirits.
Speaker:But when it comes to, because of course, in the last 10 years or so, maybe, maybe
Speaker:a little bit more bio wines have bio produced wines have come into to play.
Speaker:And I'm just curious how is that reflected in the pricing and, you
Speaker:know, what's the real difference there?
Speaker:Is it more perceived value or is there actually something else going on there?
Speaker:Well, it is, to be fair, it is a little bit more expensive to produce.
Speaker:Now, when you talk about bio, there are so many terms that throw around
Speaker:in the wine area that I think, you know, do a person's head in.
Speaker:I actually had to do my diploma thesis on certifications.
Speaker:Can you imagine?
Speaker:For just one region, which is Bordeaux, never mind where else.
Speaker:It's insane.
Speaker:But if I combine them together and I talk about, let's say organic and
Speaker:overarchingly, you know, bio sustainable practices, as it were, what this basically
Speaker:means is again, going back to the agricultural behavior of, how organic
Speaker:kind of came into eating produce, which was, let's stop throwing chemicals.
Speaker:Into everything just to kind of create more volume more volume more volume
Speaker:more volume So if you're creating better quality, so you're using less
Speaker:chemicals, yes you save money on okay Not spending on using a lot of chemicals
Speaker:By and large when you look at a lot of wine regions, they're beset with
Speaker:All the problems that's happening with the, you know, global climate change.
Speaker:Then you look at regions like Bordeaux, which are wet and humid and weirdly cold.
Speaker:And there's a lot of pests and disease pressure and kind of automatically
Speaker:will mean there will be a settling time when your yields are going to contract.
Speaker:Right.
Speaker:When your yields contract lower volume, that means you have less
Speaker:wine to sell the quality higher, but you have less wine to sell.
Speaker:So therefore it's a bit more expensive.
Speaker:Right.
Speaker:You drink better.
Speaker:So, there and it will balance out ultimately at some point, but I think by
Speaker:and large it's definitely costs a little bit more because along with just, it's not
Speaker:just the lack of chemicals, but generally people who talk about sustainability, who
Speaker:talk about, all of these certifications, it goes beyond, it goes into the process.
Speaker:It goes into how you're treating your people.
Speaker:It goes into, you know, is there sort of, you know, fair
Speaker:working conditions, et cetera.
Speaker:So it's, it's about, you're not running a sweatshop.
Speaker:It's when you're not kind of doing that, that's, you know,
Speaker:where the cost sort of comes.
Speaker:So there is a little bit of perception as well, because I think sometimes, you
Speaker:know, you could be drinking something and you're like, Oh my God, this like
Speaker:tastes like 50 shades of apple cider.
Speaker:And after a while, you're like, you know, put something in it to stabilize it.
Speaker:But I think there is a thoughtfulness and giving back to the school.
Speaker:There's a thoughtfulness in how we are sort of doing our practices.
Speaker:But there, there is a reflection in the price.
Speaker:It's, it's the same as how it is with a lot of produce, but I wouldn't
Speaker:get hung up on the word organic.
Speaker:I think we need to be a bit more conscious and use sustainability because
Speaker:a lot, and this also happens with food, you can get a lot, but I will
Speaker:give you the example of a couple of regions in the world where they have a
Speaker:natural advantage, dramatic conditions where sustainability is much easier.
Speaker:I think New Zealand wins hands down.
Speaker:Like it's this country, right?
Speaker:It is paradise on earth.
Speaker:And even as, you know, when you're studying wine, you're sort of going, Oh
Speaker:my God, like they've got every climatic, they get the sun, but they kind of get
Speaker:the winds, they get the coolness, they get the rightness, they get all of it.
Speaker:But by and large, pretty much everything that's produced in New Zealand is,
Speaker:you know, they have a benchmark.
Speaker:You will never find New Zealand wines too expensive.
Speaker:You will never find them too cheap.
Speaker:But you will always have a quality consistency when you buy it because
Speaker:of the general sort of ethos in the country and their natural advantages.
Speaker:But that is, I think, possibly a good benchmark to sort of then look from
Speaker:when you're looking at where can I have quality wines that have been
Speaker:made with a relative level of ethos.
Speaker:You know, so everyone in the world is doing that, including in the uk.
Speaker:Yeah.
Speaker:But yes, there is uk.
Speaker:It's hard to sort of find , organic biodynamics sustainably.
Speaker:You've made wines at 5.99 a bottle.
Speaker:Yeah.
Speaker:, it's almost impossible, right?
Speaker:You probably wouldn't want to, right?
Speaker:Because No, no.
Speaker:I don't know what we are putting in our body, so I really would not recommend it.
Speaker:Okay.
Speaker:So now, is there a difference then in sort of this, this overview of how you
Speaker:price a wine versus how you price spirits?
Speaker:Yes.
Speaker:With spirits, there's certain similar factors, but unlike
Speaker:grapes, which is a fruit and yield is a really huge part of it.
Speaker:With spirits, it's primarily made from grain and obviously there's
Speaker:cognac and things, but it uses brandy.
Speaker:It uses pomace.
Speaker:It doesn't use fresh grapes.
Speaker:With spirits, the biggest differential is between large volume production
Speaker:and smaller batch craft, the word sort of, you know, artisanal as it were.
Speaker:Now, for example, and I hope the folks at Diageo don't shoot me for this, but.
Speaker:A Johnny Walker Black is a really well made blended whiskey.
Speaker:They don't cut corners, it's very well made, but it costs, I
Speaker:think, about 40 or 50p a bottle.
Speaker:The liquid inside it.
Speaker:Just because of the sheer volume, they own the global chain.
Speaker:Because... You are able to recoup back the cost or you
Speaker:put in the initial investments.
Speaker:The investments in, in, in distilling spurts, initial investment is huge, right?
Speaker:While your stills, you've sort of got to have the right hygiene,
Speaker:storage factors, all of that.
Speaker:But you, if you're able to make enough and you're able to find a market for
Speaker:it, you make your money in the volume.
Speaker:Whereas when you're looking at smaller producers, it just becomes XXX more.
Speaker:It's just because.
Speaker:You off the economies of scale there and things that again, you know, you, you,
Speaker:you can't get the same discounts that you would when you're buying a barrel
Speaker:versus somebody who's buying, you know, I need to buy three barrels versus
Speaker:somebody who's like, you know, I'm buying.
Speaker:50, 000 barrels a year or 50, 000 bottles versus I'm going to make 3000 bottles.
Speaker:So there is a huge cost differential there.
Speaker:Then the other really big thing about spurts is when you go
Speaker:away, there's a standard, right?
Speaker:So most gins, on the premium end will kind of cost you anything
Speaker:in the thirties to forties in the UK, like it's a standard muscle.
Speaker:It's like, if you quit a few pounds here or there, there is with wine, it can vary.
Speaker:You know, massively, but then when you start getting into
Speaker:collectors type stuff, there is a very significant difference there.
Speaker:It's because of the aging process.
Speaker:So for spirits, aging is the biggest thing, especially with whiskeys.
Speaker:It's a barrel age, which is why gin, with very few exceptions, you
Speaker:don't find them in like, you know, psychotic premium categories, but
Speaker:whiskeys and things that you age.
Speaker:It's that because of the high alcohol content, most of all,
Speaker:there's a huge evaporation loss.
Speaker:So the harder the country, the more it, you know, of the angels share,
Speaker:how long are you aging it for?
Speaker:What's the quality of the barrels, And then also like, you know, on the prestige
Speaker:and the dramatic nature of the bottles.
Speaker:Like we're talking Baccarat crystal, we're talking all of this.
Speaker:So whereas with wine at the end of the day, even the most expensive bottles
Speaker:would be costing like, you know, a certain amount here, just the container of the
Speaker:spirit can get into like ludicrous amounts
Speaker:have a lot more consistency in pricing.
Speaker:You start to really get into, you know, collector stuff, but even there, I
Speaker:think spirits is a lot more consistency, consistently priced than wine.
Speaker:Yeah.
Speaker:And it also suffers less from the vagaries of nature and
Speaker:vintage variation year on year.
Speaker:So, you know, releases in 2022.
Speaker:Very expensive because in certain countries, because they had massive fires.
Speaker:So they lost about 50 percent of the production.
Speaker:We keep hearing about hail when the vines are very tender.
Speaker:When that happens in spring, they don't just lose crop from that year.
Speaker:Because there are lots that are gonna open the following year, you lose crop
Speaker:for a number of years, that variation is less dramatic in spirits, because
Speaker:you're aging them, you're releasing them, you're sort of blending them,
Speaker:there is a lot more consistency so you can balance yourself out.
Speaker:That's why so many people are getting back into the distillery great game
Speaker:simply because the distiller's margin is higher than what a winemaker's margin
Speaker:is unless you're a multi wall shield.
Speaker:Right, right.
Speaker:Oh, that's really interesting.
Speaker:Yeah.
Speaker:I mean, I've never seen, I mean, okay.
Speaker:Never seen.
Speaker:I haven't been around that long, but it was really obvious.
Speaker:When all of these like micro producers of gin started because
Speaker:they're just gin everywhere, right?
Speaker:I mean, I can make some and that's probably one of the easier ones
Speaker:to, to produce, which is why,
Speaker:why, because you just work with a good neutral spirit and you decide
Speaker:by many distillation things.
Speaker:I mean, COVID was so many people turned into gin producers in a way.
Speaker:It's a really, it's a really fascinating world, there's like so much magic.
Speaker:There's a lot of innovation in the world of spirits that's happening,
Speaker:which I think is really quite fantastic.
Speaker:It's able to be a lot more agile than wine.
Speaker:But yeah, I think with spirits.
Speaker:Without question, there is a lot more consistency in pricing and quality.
Speaker:I had to laugh because last year I was at Christmas market in Freiburg, Germany.
Speaker:And I ran across this stand that had moonshine.
Speaker:And as an American, so I live in Switzerland for anybody who's
Speaker:watching, doesn't know that I was like.
Speaker:They're selling root cherry.
Speaker:And it was really lovely.
Speaker:I have to say,
Speaker:but all of this home distillation stuff is moonshine.
Speaker:You know, there is another magic like today I can, I mean, of course
Speaker:you can do this with wine as well.
Speaker:The world is shifting so much.
Speaker:Like, you know, when you talk about investment, like people used to
Speaker:talk about wine collections, right?
Speaker:Right.
Speaker:Whiskey costs today are even more stable investment.
Speaker:Because if you get the right product and again, you know people keep
Speaker:talking about rum But you know, we will see what rum goes unless you're
Speaker:buying something from a distillery.
Speaker:That's completely closed It can never be produced again.
Speaker:Then basically you can like come on stupid amounts of money at auction.
Speaker:Like, you know, Bowmore released the 20, 38 year old whiskey that got into a
Speaker:bidding war and sold for half a million.
Speaker:So for example, with one of my private clients, you know, they're
Speaker:going to be buying a cask of whiskey and they want it for the long term.
Speaker:So by the time, you know, and I'm going to probably buy them
Speaker:something that's currently about sort of eight years of age, because
Speaker:by the time they will want to.
Speaker:You know, either dispose of it, or they want to actually partially
Speaker:bottle some for their friends.
Speaker:At that point, it's going to be 18 years old and the storage costs.
Speaker:Yes, they're expensive, but the exponential value of that risky
Speaker:at that point would be phenomenal.
Speaker:And then this person is going to be having this amazing.
Speaker:You know, personalized bottling, they're going to be giving out to their friends
Speaker:as a big, big major celebration.
Speaker:So I think that there's something quite remarkable about that.
Speaker:People do this with wine as well, but with spirits, I think it's, yeah.
Speaker:Also I think, it's interesting that for the first time in the
Speaker:history of time, spirits sales have overtakenwine sales in the U.S.
Speaker:Hmm.
Speaker:Is that a good thing or a bad thing or just an interesting thing?
Speaker:Interesting things because wine is going through a bad time.
Speaker:I think global, you know, climate change is destroying a huge amount.
Speaker:Yields are getting unpredictable.
Speaker:Small age year prices are going to the roof.
Speaker:People are earning a lot less because of all of the, you know, the global
Speaker:drama that's kind of going on.
Speaker:We're all aware of it.
Speaker:So it's kind of becoming a little bit more unwieldy.
Speaker:I think the other thing that we also forget with wine is you can't just
Speaker:buy a great bottle of wine and just store it anyhow and think, you know,
Speaker:it's going to hold itself together.
Speaker:It's a fragile item, right?
Speaker:The more expensive wine is the better you want to store it.
Speaker:So even you sort of look at countries like India and everything and people
Speaker:are like, Oh, you know, the wine scene.
Speaker:And I'm like, yes, it's, it's burgeoning.
Speaker:But with that, you also need to have the infrastructure.
Speaker:It's not going to die.
Speaker:You keep it out of the, you know, direct light.
Speaker:But if I stick a bottle of spirits, you know, in a
Speaker:cupboard in India at 40 degrees.
Speaker:It's centigrade heat.
Speaker:I don't know how that converts in American Fahrenheit, but, um, 40, 50 C it's fine.
Speaker:My wine is going to turn into Madeira.
Speaker:So
Speaker:you can use it like a wine phrase.
Speaker:So you know, it's, it's, it's, it's, it's, there, there's a lot of costs involved.
Speaker:Um, and lots of sort of duty and regulations and alcohol is
Speaker:a, is a different, difficult industry to price smartly.
Speaker:So Ruchira, if, if someone out there listening is starting a business in the,
Speaker:uh, food and beverage or the wine and spirits area, and they need to go about
Speaker:pricing their wine or the spirits for that, what tips do you have for them?
Speaker:I think.
Speaker:Let's kind of be, let's start with what it actually cost them to make
Speaker:and then the quality of the product.
Speaker:Right.
Speaker:Right.
Speaker:And then I think if it's of a particular ilk, it's worth an understanding
Speaker:what's the right market for you.
Speaker:Because make a great product, for example, but it literally costs you.
Speaker:And I'm going to lose, lose numbers to, to run the math on it.
Speaker:It costs you 20 pounds to make this.
Speaker:Beautiful wine.
Speaker:Um, and you're like, but I really want to get into the UK and you're
Speaker:making it, let's say in, you know, I don't know, Spain or South
Speaker:Africa or something, actually.
Speaker:And then you sort of go UK is a very price sensitive market.
Speaker:You're going to do a pricing war to try and sort of, you know,
Speaker:get into this here or you go find yourself a different market for it.
Speaker:I think the other thing is, what is it that you want to, you want to do
Speaker:in the, in, in this industry, right?
Speaker:There are so many different variations that you can do, whether you kind of
Speaker:come in as a consultant, you want to be a sommelier, you want to understand why
Speaker:I think it's important kind of doing the certifications, but when you're pricing a
Speaker:product, it's, um, just, just be realistic with the market that you want to sell
Speaker:in and then work backwards from there.
Speaker:Yeah.
Speaker:Because you might find that producing a wine in the UK is
Speaker:not the right thing for you.
Speaker:You really want to produce.
Speaker:Today, if I wanted to produce, I would possibly, and I want to sell
Speaker:in the UK until I build my brand, I would produce it elsewhere.
Speaker:Yeah.
Speaker:Well, that's one of the things I preach to everybody out there is that, you know,
Speaker:starting with who, who you're targeting answers a lot of the pressing pricing
Speaker:questions that you have along the way, not all of them, but many of them.
Speaker:So that's always a good place to start.
Speaker:One last question before we start wrapping this up, which is what
Speaker:tips do you have for consumers when they're buying wine and spirits?
Speaker:Okay, a couple of things.
Speaker:If you're in a restaurant, the sommelier is your friend.
Speaker:You know, don't be afraid.
Speaker:If they've got a sommelier, their job there is to help you.
Speaker:Start with, this is how much I want to spend, what's your best bet, and these
Speaker:are kind of the tastes I'm looking for.
Speaker:They will do a good job for you.
Speaker:If you're in a supermarket or you're looking for wine to buy or you're
Speaker:in a wine shop or whatever, you know, online as the case might be, that's
Speaker:going back to the original example we were talking about, that anything
Speaker:between sort of, and especially for the UK between eight pounds and 20 pounds.
Speaker:every extra pound you spend goes towards the quality of wine in your bottle.
Speaker:Think about that, you know, when you're looking at it and consider, three regions
Speaker:of the world for consistency and quality.
Speaker:South Africa, New Zealand, and, to a huge extent, southern Rome.
Speaker:They've got great, you know, climatic benefits.
Speaker:Old Rome is doing a great job.
Speaker:Like I was at, um, I visited them last week.
Speaker:Uh, so, you know, that is something to kind of bear in mind.
Speaker:Those are, those are the main things that I would say.
Speaker:Okay, super.
Speaker:Those are great tips.
Speaker:I look forward to putting them into use.
Speaker:So if there's one thing that you'd like people to remember from our conversation
Speaker:today, when it comes to pricing and the wine and spirits industries, what
Speaker:is it that they should take away?
Speaker:You know what?
Speaker:Don't get hung up on what everybody does with pricing.
Speaker:Be bold, understand your industry, work backwards.
Speaker:Be bold with your pricing choices.
Speaker:They will surprise you.
Speaker:Like I was a newcomer.
Speaker:And within six weeks of launching a restaurant drinks list,
Speaker:beverage sales went from 10 percent of total sales to 30%.
Speaker:The accountant is calling the restaurant owner going, have you
Speaker:stopped paying your invoices?
Speaker:Like, why are you making so much money on beverage sales?
Speaker:So, you know, I just use a different approach.
Speaker:I think it's, it is, this just the norm.
Speaker:Okay.
Speaker:Are there any books or tools that you'd recommend for people?
Speaker:Pricing strategy.
Speaker:I think, Janene, you're probably better on that one.
Speaker:I think I'm going to go with something, you know, we all need a little
Speaker:bit of light humor in our lives.
Speaker:So for me, a tool that kind of calms me down is the humor of P. G. Wodehouse.
Speaker:He's one of the most entertaining, right?
Speaker:It's a fictional world.
Speaker:One of the most entertaining writer of... The last century.
Speaker:I'm just so comical.
Speaker:It just, it just really relaxes me.
Speaker:So
Speaker:I'll have to get the spelling of the name for you so we can put
Speaker:them for the link into the show.
Speaker:Yes.
Speaker:Yeah.
Speaker:Yeah.
Speaker:Yeah.
Speaker:Yeah.
Speaker:Cool.
Speaker:So we're sure if someone would like to talk to you about how to price
Speaker:what they're doing or how to select the right wines for their restaurant
Speaker:or location, where's the best place for them to reach out to you.
Speaker:I would suggest, you know, reach out to me either on my LinkedIn
Speaker:or, um, actually my Instagram.
Speaker:So, just contact me on my Instagram.
Speaker:So we'll put both those links in the show notes as well so people
Speaker:can reach out and talk to you.
Speaker:Ruchira, this has been really insightful.
Speaker:Thank you so much for joining me today.
Speaker:It was my pleasure.
Speaker:This was so much fun.
Speaker:I know,
Speaker:I found, I found it super interesting.
Speaker:Like I said, I mean, I have a previous life kind of in the agriculture side
Speaker:of things, so I was already fascinated and interested, um, but I know there's
Speaker:a lot of gaps in that and, um, I love putting a different spin on the topic.
Speaker:So I very much appreciate, thank you so much for being here.
Speaker:It is my pleasure.
Speaker:And actually, if I may just one last thing, I would probably say the one thing
Speaker:I think when considering drinks industry and considering pricing is to really set
Speaker:up match it with a marketing strategy.
Speaker:Because nowhere in any industry does brand and marketing have a greater impact on
Speaker:the overarching price that you can come on for your product than this industry.
Speaker:Super.
Speaker:Great way to wrap that up.
Speaker:So thank you to all of you who are out there listening.
Speaker:We appreciate having you here with us today.
Speaker:today.
Speaker:One more thing before you go.
Speaker:If you're curious about how to set prices in your business, then head on
Speaker:over to thepricinglady.com/setmyprices and check out the next cohort
Speaker:of the fair price formula.
Speaker:That's all for today, everyone.
Speaker:I wish you all the best and, as always, enjoy pricing