Which Average to Use? The Cheapest Trick in Grape Price Negotiations.
I recently had the great honor of presenting to the California Association of Wine Growers at their annual summer seminar. My topic was a somewhat wide ranging discussion of how grape growers could use the Crush Report and Acreage Report to better their business decisions, negotiations and strategy. One topic I presented was the difference between median prices and mean/average prices.
Grape buyers and sellers sometimes like to argue over whether they should index or price to Table 6 or Table 10. I think a more powerful tool is to ask to peg to your preference of the Table 8 median (easy to look up using the Grape Data Tool) or the Table 6 mean.
Sometimes the average price and median price are pretty close, as with District 1 Chardonnay, below. But with District 10 Chardonnay, the mean is actually 10% higher than the median, which can make a tremendous difference in profitability for a grower or COGS for a buyer. On the other hand, in District 5 - with its weird East/West or Suisun/Delta dynamics - the median price is about 20% higher (due to a large tranche of relatively, very low priced grapes from Delta production vineyards.) See the chart below for specific prices.
In the end, negotiations often come down to hard financial realities. But, in as much as they are relationships, we can use reason, evidence and examples to influence them and to convince the other party. So, if you're reading this and you're negotiating grape prices, I would recommend that you look these prices up and anchor to the one you prefer and hope the other guy didn't do his research.