NAPA -- Social media has been a hot wine industry technology topic in the past few years, but little attention has been put on modernizing the sharing of media with more direct bottom-line impact, including pricing analysis and sales materials, according to experts at a major conference on high tech for the industry.
How wine is priced can affect as much as two-thirds of winery revenue, but a number of producers in the industry largely don't take a coordinated approach to price optimization throughout the organization, according to one panel of sales analysts and economics experts at the Wine Industry Technology Symposium in Napa. The event drew about 200 industry professionals early last week.
By not using software that centralizes and standardizes sales and pricing data and analysis, the producer can "leak" profit to distribution and retail tiers, not predict revenue accurately enough and potentially have unintended results from pricing changes.
"I'm shocked how many distributors are still using Excel for pricing and the system of record," said Chris Spear, vice president of business solutions for Novato-based depletion data service TradePulse.
Problem is, it's a manual process of recording information and calculating wholesaler chargebacks, often in a host of spreadsheets, multiplying with the scale of the wine company and the number of trade accounts and markets.
"When I started at Trinchero (Family Estates), there were thousands of spreadsheets," said panelist Mark Barichievich, director of sales administration.
That made finding the deepest deal or what was selling at a given retailer quite difficult and time-consuming, he told the gathering of a couple dozen information technology professionals in the audience. It would take three months after a company pricing meeting to get data into the enterprise resource planning software, then it would be time for another pricing meeting.
In the meantime, local sales decisions may or may not be visible to management elsewhere, so deals knocking dimes or a dollar in one locale could combine with similar deals in others to significantly impact revenue, Mr. Barichievich observed.
"Before you do price-sensitivity analysis, you need to create a central database, so all who need to can see the information and there's less redundancy," said panelist Steven Cuellar, Ph.D, Economics Department chairman at Sonoma State University in Rohnert Park.
Some use spreadsheets as a rudimentary database, other devote resources to migrating spreadsheets to off-the -shelf, industry-specific or custom-built database software. Trinchero opted to build its own database tool a few years ago.
Key elements of any pricing software system are not only centralized data but continually "cleaned" to keep data comparable. One common problem Dr. Cuellar said he has seen in wine-pricing methodology is not properly assigning data as price vs. cost.
"When consumers are looking to buy bottles of wine, they're thinking about value and not the cost of production," he said. "You have to start with the consumer's willingness to pay."
So the pricing software should do value modeling backward from the consumer, also taking into account pricing throughout the supply chain, the panelists recommended. Each pricing change settled upon should be traceable.
With this centralized view down to prices in each market and account, then executives can monitor how pricing affects sales, brand image and other factors.
A study by Gartner Group found that beverage alcohol will be highly impacted by pricing technology adoption, with that acceptance growing from 4 percent last year to 12 percent by 2015 and 30 percent by 2018, observed panelist Manoj Menon of Vistaar, which has worked with such companies.