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Winecast 31: Rob McMillan, Silicon Valley Bank

Rob McMillanSometime in the next several years, the pricing sweet spot for wine will be $15 to $25 a bottle, compared to $12 to $15 today.

Rob McMillan, the executive vice president and founder of Silicon Valley Bank in Napa, may know more about wine pricing — what will happen and why — than anyone else in the world. And he doesn’t see that cheap wine has much of a future.

Sometime in the next several years, the pricing sweet spot for wine will be $15 to $25 a bottle; today, it’s about $12 to $15 a bottle. In this, McMillan sees the increase as the next step in premiumization, the process he has identified as the gradual increase in the cost that wine drinkers are willing to pay for what they consider a quality bottle.

We talked about premiumization, as well as how difficult it is forecast wine prices given the lack of quality information — what McMillan calls the same sort of self-interest that the tobacco companies displayed when they were discussing the relationship between cigarettes and cancer.

Also, he said, don’t expect to see wine price increases in 2018. There are enough grapes in the world so that supply will be steady, while demand looks to be about what it has always been. In this, it will be easier to start a new brand at a higher price than to raise prices for and existing brand.

Finally, we had an intriguing discussion about Barefoot, the $7 wine that accounts for as much as five percent of U.S. wine sales, and how it fits into premiumization.

Click here to download or stream the podcast, which is about 21 minutes long and takes up 6 1/2 megabytes. The sound quality is good; we recorded it using Google Voice.

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