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When should I move to liquidate (a SKU, a vintage, or a product line)?

June 14, 2021by Alexander Pagon0

When should I move to liquidate (a SKU, a vintage, or a product line)?

As soon as you realize that your existing sales channels cannot purchase your wine on your release schedule, you should move to liquidate that particular SKU, vintage, or product line. Of course, you should work with your current distributors to thoughtfully craft promotions and incentives to increase your sales velocity. However, there is only so much you can do before promotions begin damaging your brand and pricing power for the next vintage.  Furthermore, these promotions are rarely targeted sufficiently well to avoid discounts appearing on wine-searcher.

We learned this lesson the hard way in the early years of our time in the wine business. Staying current in the market at the right price is incredibly important for your winery’s long-term success. Production and sales rarely match perfectly, so even the most tightly managed wineries have some excess inventory, and distributor promotions can increase your sales a few percentage points before they begin to harm your brand. So, if you find that your excess inventory for any particular wine is going to exceed 5-10% of your sales in the previous 12 months, you should explore entirely new channels that offer discretion in re-balancing your inventory to get back on your release schedule without diminishing your brand equity and pricing power.

by Alexander Pagon

Alex Pagon is a Founding and Managing Partner of Third Leaf Partners. He leads Third Leaf’s beverage practice, which oversaw the successful turnaround of Evening Land, launched ENTER.Sake in the US and Europe as a category leader in the premium sake segment, and helped grow several other brands, including Empire Estate, Lingua Franca, Antica Terra, and OOLA. He currently advises premium wineries, breweries, and distilleries in five states and six countries. Alex also serves on the board of WineBid, the world’s largest online wine auctioneer, and is a founder and director of Protea Financial, which provides accounting and bookkeeping services to small- and medium-sized businesses.

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