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PRICING & ECONOMY

to offer the product in the long-term. This is MARGIN IS SACRED
a cost price based on the calculation of the When pricing and dealing with customers,
cost per unit of production, for example, the including sales chains, you should keep in
production of one liter of wine. Cost calculati- mind the already mentioned buzz-word:
on is used to determine the cost price, creati- „Margin is sacred!“
on of budgets, control of the production effici- Under normal circumstances, you should
ency and the like. not sell your products to anyone for less than
The general calculation formula illustra- a reasonable minimum margin, even if it is
tes what a cost calculation should genera- only 5%.
lly include: In the short-term you can, of course, offer
Bulk Wine Production Costs a product at a price lower than the cost price.
t %JSFDU NBUFSJBM o HSBQFT It is necessary to realize that you give every
t %JSFDU XBHFT UIF QSJDF PG UIF XPSL PG FN- crown, dolla, peso below the cost price to your
ployees, including the statutory health and so- customer „from your own money“. Yes, it can
cial insurance contributions be justified if it keeps you alive, so the custo-
t 0UIFS EJSFDU DPTUT PUIFS NBUFSJBM GPS QSP- mers buy your inventories from you at the ti-
duction, e.g. yeast, clarifying agents, nutrition, mes of the worst crisis, allowing the company
chips, improvers, filtration costs and wooden to continue its operation and recover after the
barrels, which are calculated directly into the next harvest.
consumption Another reason for this can also be your
t 1SPEVDUJPO PWFSIFBET PUIFS DPTUT SFMBUFE incentive aimed at attracting new customers
to production, such as electricity, depreciati- (but be careful, when you sell something for
on, etc.) fifty bucks once, you can hardly raise the price
By production of bottled wine also own to a hundred!) or your short-term fight against
costs of bottled wine production - Bottle, the competition.
stopper, label, shrink top, cardboard carton, Such cases are more likely to be seen in
bottling costs. other fields; it is known to enter the bakery
district with dumping prices for several mon-
Performance Costs ths before attempting to implement a hostile
t "ENJOJTUSBUJWF PWFSIFBET JOUFSFTU PO MP- takeover. In this case, the relatively precise zo-
ans, costs associated with administration and ning of sales determined by the nature of the
accounting, including salaries and health and fresh goods helps this strategy.
social insurance contributions for administra- In France, there are local bakeries that sell
tive and other staff, insurance, membership fresh baguettes straight from the oven all day.
contributions and fees) They don‘t mind the lower price of packaged
baguettes in supermarkets - the French go to
Total Performance Costs their baker. In the USA customers buy them
t 4BMFT DPTUT XBSFIPVTJOH MPHJTUJDT NBSLF- in hypermarkets and finding a bakery and
ting, etc.) fresh bread is unique there. The attack is easier
The sum of all items listed in the general there, packaged bread has a longer shelf life
calculation formula gives the cost price. It is and it can be transported over longer distan-
a price that will cover all our costs but will not ces. Wine can be transported almost without
bring any profit. Simply said - we live but we restrictions - watch out for that!
work for free. The price below the cost level is called dum-
In general, however, we should work with ping and its long-term use is considered to be
a profit, i.e. with a reasonable trade margin. unfair competition and is therefore illegal.
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