Price Fixing vs. Brand Protection

One of the challenges faced by bloggers and other online reporters is the ever-present pull-and-tug between posting a story quickly and getting it right.

This came to mind the other day when I first came upon a story dealing with Australia’s iconic Grange wine and the efforts of its maker, Penfolds, to influence its price at the retail level.

I remember reading the story and thinking, “This doesn’t sound right…”

Sure enough, the next day another story appeared online that verified my initial reaction and provided some clarification. You can read that story here.

In the business world, and this applies to almost any product you could name, there is always a thin line between price fixing and protecting a brand.

Price fixing, of course, is illegal. Protecting a brand, of course, is essential.

Brand protection is particularly critical for luxury protects such automobiles, watches, jewelry, etc. Penfolds’ Grange—long considered one of Australia’s top wines—certainly falls into the luxury category. A quick Google search of “Penfolds Grange 2005 price” brought to my screen a compilation of prices ranging from $262.98 to $409.

Yes, that is per bottle.

That places Grange in the Rolls Royce sector of luxury wines, and any substantial lowering of the price at the retail level could harm the brand—not only for the 2005 vintage, but for subsequent and even past vintages. So it would be easy to understand if Penfolds executives wanted to limit how low the price could go.

But as you’ve seen from the follow-up story, company officials say that’s not what its leadership had in mind. It was simply doing what any company interested in protecting its brand does: closely monitoring its internal pricing policies.

Ultimately, that’s the best way for a company to influence a product’s retail price. After all, what kind of retailer—other than one holding a “fire sale,” perhaps—would sell a product for less than he paid for it?

As always, your comments are welcome below.

Posted in The Wine Business
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