I’ve reblogged a couple of Mike’s pieces before. I just find them incredibly well written, completely thought out and generally very informative. This one comes your way with double kudos (1) I learned (or at least relearned) a lot about price elastic as regards wines, and (2) The comments about the post (go to his blog directly to read them) tell us a lot about the subject and even more about the issues in todays restaurant retail market. Enjoy this piece from the Wine Economist himself — Mike Veseth.
The final panel discussion at this year’s Professional Wine Writers’ Symposium in the Napa Valley was devoted to restaurant wine lists (students from the Culinary Institute of America’s wine program attended along with the wine writers). “Wine List: Friend or Foe?” was the topic and New York Times critic Eric Asimov was the moderator.
There was a lot to talk about because everyone seems to have an opinion or a pet peeve about restaurant wine, but time was limited and when I saw one of the panelists, Andrea Robinson, shortly after she smiled and struck a “wine economist” chord: “I wish we could have talked about price elasticity of demand,” she said.
Price elasticity of demand? Yes! That is how we economists talk about how consumers respond to the prices of different products and it is a fascinating question when it comes to restaurant wine.
The wine world knows Andrea…
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Robert, I found this article fascinating. Didn’t understand all the economics, but enough to get the concepts.
The one comment about the man who wanted to introduce his customers to sherry by having a free happy hour glass, then ‘upping’ the price to $2.50-$3 reminds me of an experience selling a horse many years ago. My friend had bought the horse VERY inexpensively, horse was amenable to a job change (from racing Thoroughbred to show hunter), and after about a month, advertised him for a significant markup for her, but definitely low-end of the market. Had a few folks come to try him, but all were convinced (in their own minds) that there had to be a hole in him somewhere at that price. Two weeks later, I convinced her to double the price – and he sold within a week. Weird/sad how we don’t trust a bargain!
Back to wine, though – as in most things, the vital key is knowing your customers/demographics – and flexibility.