Managing the business side of the wine industry is often less alluring than the art of winemaking that precedes it. Nonetheless, successful wine operations, sales, and distribution require the same precision and finesse in order to maximize profit, stay competitive, and support continued production. It is imperative to always ensure the juice is indeed worth the squeeze.
Among the top concerns keeping winery owners and general managers awake at night is whether the money they’re spending to promote their wine is hitting the mark and driving a profit.
Most wineries have an ERP system to centralize finance, operations, and inventory management, but pricing and promotions are generally housed in Excel spreadsheets, written on post-it notes by the sales team, or put in a separate software system entirely. These manual, disconnected pricing tools and the data they contain fail to provide a complete understanding of the return on trade investment.
What your current tools may be missing
“Wineries need to easily calculate gross-to-net (sales) in order to optimize their spend,” says Doug Hoogervorst, founder and CEO of Tradeparency, a winery-specific trade spending, pricing management and depletion allowance software solution. “If they only have the pricing, they can’t calculate net sales or net income. Plus they need all of their other costs to fully calculate net sales and obtain a sales lift calculation. Once they have that, they can determine if it is a “good” lift or if they need to begin adjusting their spend to maximize profits.”
“Most people who make wine know their case volume year over year,” adds Andrew Ridling, Vice President of Product Management at Tradeparency. “The main lever they have is the pricing. If their prices aren’t getting them the return they need, they need to evaluate whether they are investing in the right places. There are all kinds of data wineries should track to help them do that.”
For example, sales teams often offer expensive ad hoc discounts for a by-the-glass menu placement, and most wineries don’t know whether that spend turned a profit. Plus, distributors sometimes pass that discount on to other customers or channels, something finance can miss when reconciling invoices. A system that automatically catches these misses and measures sales lift gives wineries the tools to close these hidden loss gaps.
Sampling and demos, the next largest expense after depletion allowances, are usually bucketed along with the cost of wine lists, tastings, and special events in price management and GL systems. A system that can easily capture each event separately gives wineries a better lever to manage profitability.
Another source of profit loss is across-the-board deal-backs accompanying a price increase. Testing the deal-back in some markets while jumping straight to full price in others allows you to measure whether full-price markets performed as well as dealt-back ones. If they do, switching all markets to the full price can save a significant amount of money.
“This scenario is a concern across the entire industry,” says Hoogervorst. “We found that it wasn’t happening in just some of our client engagements; it was happening in all of them. It was when we couldn’t find a solution in the market for this issue that we knew we needed to create one.”
That is when Tradeparency was born.
Why full-cycle price and promotion management matters
Tradeparency enables wineries to move beyond pricing and depletions data to shine light into the dark corners of the bigger pricing and trade spending picture. Without full visibility across promotions, distributors and markets, a winery can’t understand and optimize profits. With Tradeparency, everyone can see their lift and optimize their spending.
Ridling’s 15 years as the Director of Technology at The Hess Collection Winery, combined with Hoogervorst’s 16 years as founder and CEO of Business Impact, a business intelligence consultancy in wine and spirits, provided the depth of wine industry knowledge to build a software platform that solves the winery business issues outlined above with technology.
“No winery wants to watch dollars walking out the door,” says Ridling. “The consumer packaged goods companies have this dialed in, but those expensive CPG systems are overkill for wine companies. We wanted to have narrow visibility into the unique business problems wine companies face.”
Hoogervorst adds that Tradeparency gathers richer data than other software and stops leaks, which is a huge value for wineries of all sizes. “Using Tradeparency for compliance alone can save a winery 5-14% of what they spend annually by just cleaning up errors, expired deals, omissions and mistakes. Tradeparency pays for itself quickly.”
The wine data artisans and enthusiasts at Tradeparency are standing by and ready to prepare a tailored demo for your wine business at no cost. All it takes it a 15-20 minute discovery call so they can better understand your current pricing and promotion processes, goals, and requirements.