Is scarcity a real marketing argument for wine?

Scarcity, that is a deficiency in quantity or number compared with the demand, is a marketing tool used by wineries to promote their wines, just like carmakers use it to extend the delivery delays of their cars. It can be a powerful and adapted tool depending on the price point of the wine.

The efficiency of the scarcity argument will be dealt with analyzing three price tiers. Tier 1 will include wines valued several tens of thousands of dollars. Tier 2 will deal with wines costing up to several thousand dollars and Tier 3 will concern premium and super-premium wines, going from 17 to 100 dollars. In each case, other arguments might complete or interfere with the scarcity element.

 

Extremely expensive wines for just a few.

Tier 1 includes ultra-luxury wines, mythical wines and extremely expensive new wines.

Ultra-luxury wines are such wines Gout de Diamant Champagne, Taste of Diamonds sold at 2,07 M $ a bottle. This type of wine is distributed through Millionaire Fairs and promoted in luxury magazines. It is aimed at ultra-rich consumers. A wine such as Taste of Diamonds is related to true scarcity. Only a few bottles are available and the motivations of the consumers are simple: be among the “happy few” to be able to enjoy a specific wine. However, other motivations also come into play: the ability to buy the wine and the possibility to show that you can afford it. Along with scarcity, uniqueness is also a key selling argument. Taste of Diamonds has an exclusive packaging associated with a piece of jewelry. People sensitive to beauty and art will be moved by the product as well.

Mythical wines are also scarce. Screaming Eagle Napa Valley Cabernet Sauvignon 1992 now sells at 500.000$ in auctions. Only 9.000 bottles of this wine were produced. The 1992 vintage, released in 1995, through a combination of very low production numbers and highly positive reviews (wine critic Robert Parker awarded the wine 99 points) resulted in Screaming Eagle becoming one of the most celebrated and expensive wines in the Napa Valley. Today the estate's flagship wine retails at an average price of $2,983 per bottle. Motivations of the consumer consist in having a piece of Californian wine history in the cellar and own a mythical product. In this case, a scarce product meets a wider demand. But scarcity, again, is not the only positive selling argument: owning a historical product also plays a role. Not to mention the need to have the money to buy such a wine. Besides, the owner of such a product will be able to resell it easily, making that speculation might come into play, artificially increasing the price of the wine. Another example of a mythical wine is Dom Perignon Rose 1959. It was ordered by the Shah of Iran in 1971 to celebrate the 2.500th anniversary of the Persian Empire. It now sells at 42.300 $ in auction. This is truly a scarce product but scarcity alone does not explain its high price. It can also be considered as part of the global history of Iran and therefore might appeal to people having special affinity with the Champagne brand and the history of Iran.

And then there are newly introduced wines which combine scarcity and an opportunistic approach from the owners. This is notably the case of Aurum Red Gold series wines. Made in La Mancha, Spain, only 300 bottles are made every year. The wine sells at 25.000 $ a bottle. The business acumen of Hilario Garcia, the owner, made that his wine fetched this high price. Having learnt that his wine had been sold in auction at that price in the US, he decided to sell his wine that same price ex-cellars. True scarcity is there. Time will tell if the wine can keep that price and still be sold. Scarcity is a positive element if that high price is truly justified. However, the personal story of the owner and winemaker also comes into play. Hilario has been making extensive research on viticulture and winemaking and has a very particular way of crafting his wine. And this is part of the story completing scarcity.

Classic wines and wines with a purpose.

If in the previous paragraph scarcity was real, in some instances that will be dealt with in this section, scarcity might be perceived more than real. Dom Perignon sells over 5 M. bottles a year. Many wines, perceived as being scarce on the market are not that scarce. For instance, Chateau Mouton Lafite, selling at 500 – 1.000 €, depending on vintage produces 180.000 to 240.000 bottles a year of their first wine. The 2nd vin, Carruades de Lafite is produced at 300.000 to 360.000 bottles. Chateau Latour produces 200.000 - 220.000 bottles/year.

Compared to Tier 1 examples, these wines have a much higher production level. High price coupled with the name of an old chateau or property results in perceived scarcity rather than real scarcity. High-quality linked to known brands makes that these wines can be easily re-sold. They offer high-value and a real opportunity for investment and/or speculation. Through heritage, prestige and history, these wines fetch high prices linked to offer and demand fluctuations. The negative aspect of this situation is that many traditional consumers, accustomed to buying these wines can no longer afford them. They are now destined to those with a very high purchasing power. In the 1980s, American consumers were the ones buying them, mainly Bordeaux Grands Crus Classes (GCC). Then Japanese consumers took over, before wealthy Chinese buyers came in. Bordeaux GCC are sold through the Place de Bordeaux and its negociants, re-selling to high-end importers, who make the wines available in on-trade venues all over the world.

In the same vein, other truly scarce wines are available for connoisseurs consumers. Scarcity combined with a unique winemaking project can be a powerful marketing tool, making the wines reach several thousand euros on the market. Name, reputation and unique stances of the winemaker are in this case key to sell the wine at such a high price. For instance, Liber Pater winery in Bordeaux has the purpose to sell wines with the same profile as the wines had before phylloxera. This purpose attracts many clients around the world, with a different profile from the ones that buy GCC Bordeaux wines. Wine geeks, engaged consumers looking for true wines are the ones buying them. The Le Reve and L’Orage cuvee are sold on top of 3.000 GBP ex-cellar price. Fierce opposition of Bordeaux GCC chateaux are part of the reputation and value of the brand as well. Distribution channels will be different from GCC sales: mainly specialized importers and distributors will buy the wines and make considerable efforts to build the brand.

Small projects and icon wines from around the world.

Small wineries with a tiny production coming from a few hectares of vines in specific regions sell truly scarce wines at reasonable prices. For instance, in the Cuenca region, a 150 miles East of Madrid in Spain, Mikaela and Aurelio Garcia are crafting 3000 bottles of a wine based on the Bobal grape variety, indigenous from that area. Here scarcity, contrary to many cases already analyzed, does not fetch high prices. The wines are sold at 30 GBP per bottle. Scarcity here does not therefore have a positive impact on prices. Main selling argument will be the grape variety argument and the talent of the winemakers to make a unique wine. Since the region is unknown, as well as the grape variety and the winemakers, scarcity is barely a selling argument. Winemaking philosophy and the fact that the vines are very old might help in attracting customers. It takes a lot of effort to market and sell the wine. It is currently distributed in Iceland and Norway, in the Vinmonopolet. It is also sold in Movenpick, chain of wine shops and wine bars.

And then there is the case of icon wines selling at reasonable prices, such as Cloudy Bay Sauvignon Blanc. It is sold at around 25 to 28 GBP, depending on the markets and distribution channels. It is considered as the number one, truly global Sauvignon Blanc from New Zealand. It belongs to the LVMH group (Louis Vuitton Moet Hennessy). By that simple reason, it has an aura that other wines do not have. And because of it, it is perceived as scarce, when in fact current production of that Sauvignon Blanc accounts for 100.000 cases a year, that is 1,2 Million bottles. Wine-searcher gives this wine consistent scores of above 90 points from 2014 onwards, confirming high quality. Here again scarcity is only perceived and the main selling argument is the grape variety, its exotic origin and the fact that the winery is part of a prestigious luxury group.

 

As a whole, scarcity alone is not a valid selling argument. Scarce very expensive wines, valued sometimes millions, need to find the consumer with the adequate buying power, which is not an easy task. In those cases, art and design accompany the marketing of the wine. Linked to high price and scarcity, the possibility to speculate on the wine like on a financial product diverts the wine from its true nature, that is a living agricultural production that gives pleasure. In the case of expensive new wines, scarcity is not the only argument: it has to come with a true story to tell. Perceived scarcity can lead to high prices and traditional consumers moving away from their favorite wines. Then, other true scarce wines can fetch either very high prices or premium prices. But a true viticultural project is there to back up scarcity. Along with arguments such as grape variety, exotic origin or the age of the vines.