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Interview: Caymus Vineyards Makes Bold Choice

April 28, 2011

With consumers feeling the squeeze of the U.S. economic downturn in mid-2009, upscale wine marketers faced an unenviable choice: maintain pricing in a difficult market, or reduce prices. While some high-end players opted to hold the line, Napa’s Caymus Vineyards went against the grain and revamped its pricing formula. Shanken News Daily recently spoke with Caymus owner Chuck Wagner to see how his bold choice has paid off.

SND: What led you to your decision to cut prices?

WAGNER: We’re a family-run company with all our eggs in one basket, and that separates us from some of the competition. If we don’t sell our product, we won’t have a business. So in August of 2009, we brought our prices down, because we could see from the market that the energy wasn’t positive. Wineries and wine stores in our area were having trouble moving product, and we felt we needed to address the situation in some way. We decided to cut our prices in one fell swoop, to give consumers a great deal while still capturing some profit, and in the process establish a new price area for our wines.

SND: What was the change in dollar terms?

WAGNER: The retail price of our core Caymus Cabernet (yearly production of around 40,000 cases) went from roughly $70 to $60, while our 2006 Special Selection Cabernet (18,000 cases) went from about $140 to $120 (many discounters went as low as $99). Meanwhile, we cut the price on our other key labels: Conundrum (120,000 cases), Mer Soleil Silver Chardonnay (20,000 cases) and Belle Glos Meiomi Pinot Noir (80,000 cases) each from around $30 to $20.

SND: How did the pricing cuts impact performance?

WAGNER: We made those pricing changes in the last four months of 2009, and we sold out of our 2006 Special Selection by November of that year. We then came right back with our 2007 Special Selection, and it sold out by the end of that year. Then, in 2010, our overall sales increased by more than 20% over the previous year.

SND: How’s it going in 2011?

WAGNER: We’re even stronger. We’ve gone from an inventory-heavy situation to an inventory-short situation. We may not have enough wine to support market demand for the entire year.

SND: When a winery considers cutting prices, there’s always a concern about tarnishing image. What type of feedback have you received since your pricing move?

WAGNER: The response from consumers has been very positive, and I think the fact that we made our move ahead of others in our zone of pricing and quality is a big part of that. Also, it’s worked because we’re sticking to the same prices. We’ve established these new price points, and consumers see the value. Additionally, quality is now more important than ever before. Consumers are unwilling to chance their money on wines they don’t know about, and they pay more attention than ever before to quality. If you don’t keep up on the quality end, they’re not going to buy your wines.

SND: Anything to mention on the new product front?

WAGNER: There’s been a move in the market toward non-varietal reds, with blends that are a bit sweeter finding success. We’re going to enter that market this summer with a new offering of Red Conundrum.

SND: Given all of your growth and success, are you looking at any opportunities to add scale through acquisitions?

WAGNER: No, we’ve established our operations, and that’s where we want to be.

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