A Paso Robles, CA wine client was challenged to better manage the depletion of its cabernet sauvignon inventory and optimize revenue for their 2017 vintage. The goal was to develop a strategy to maximize revenue and extend the inventory from tasting room sales further into the sales year.
Mather pulled sales and inventory velocity data directly from the wine fulfillment system to create SKU specific, econometric demand models to estimate the level of price sensitivity for the product. Price (elasticity) sensitivity estimates were layered on depletion rate forecasts to understand volume and revenue implications under various pricing scenarios. Consulting with the client, Mather was able to make a 20% price increase recommendation for the initial test.
Six weeks post application, the increase strategy has performed exceptionally well with no impact to the current inventory depletion curve and the 20% increase is producing an incremental forecasted revenue of $8k above initial targets for the remainder of the current vintage year. This type of price/ inventory tool provide near real-time updates and is effective for identifying opportunity and risk for each of your specific vintage sales.