Price Setting in the US

The price of the wine “out of the cellar,” meaning the amount the winery receives for the finished wine, without consideration of any costs that are incurred after the wine leaves the winery. In other words, this is what an importer, agent, or broker pays for the wine if they are responsible for all subsequent costs. Sometimes called Ex Works (EXW).

Free on Board, sometimes referred to as Freight on Board. Historically, this is how much it costs an importer to get wine on board a ship. FOB indicates the transfer of responsibility from one party to another—as from the producer to the importer (or from the importer to the distributor)—whether that takes place at the ship’s rail or a warehouse or elsewhere. In a typical example, the wine is transferred to the importer at the port of departure from the coun- try. In this case, FOB includes the ex cellar price, to which is added the transportation and possible storage costs between the winery and the port, and any insurance or fees prior to loading on the ship. If the importer takes the wine from the winery’s loading dock, the FOB is the same as the ex cellar price. An alternative term is FCA (Free Carrier).

The price of the wine when de- livered to the importer’s warehouse. CIF includes the FOB price, to which is added ocean freight costs (shipping the wine from the port of origin to the destination port), insurance, and “pier drayage” (moving the wine from the ship to the warehouse). In most instances, the importer pays these costs, but sometimes a winery can offer to take responsibility for all of the costs up to the wine’s delivery at the importer’s warehouse; the winery would then receive the much higher CIF price for the wine rather than the ex cellar price, but must bear significant costs and risks as well.

The cost of the wine to the importer. The landed cost includes the CIF price plus federal excise taxes (FET) and other government fees.

The price paid by the wholesaler/distributor to the importer for the wine. At minimum, the laid-in cost includes the landed cost plus the importer’s markup. It can also include ware- house storage fees, inland freight (moving the wine from the im- porter’s warehouse to the distributor’s warehouse), and state and local taxes. From the wholesaler’s point of view, this is their FOB price, and it is the price on which they base their markup and costs when pricing the wine for retailers.

The wine price offered by a wholesaler/distributor to a retailer, before any allowable discounts are applied. Discounts and sale pricing by a wholesaler are not permitted in some states.

Markup is the percentage difference between the actual cost and the selling price. Markups occur at several lev- els in the supply chain—between producer and importer, between importer and wholesaler, and between wholesaler and retailer/ restaurateur. Margin is the percentage difference between the selling price and the profit, again occurring at several points along the supply chain.

The wine’s price to the consumer from a retailer or restaurant, including the retail markup. Depending on state laws, the distributor may propose a Suggested Retail Price (SRP) for the wine, and the state may set a minimum retail price.