Stuart Cellars

ASSIGNMENT 6 – STUART CELLARS 1. The factors used by Stuart Cellars are mostly costs. They are basing most of their pricing on the overall cost to produce a bottle of wine, while trying to stay competitively priced in a highly critical market. They are also using their quality of grapes and processing to demand a higher price per bottle. In addition, they are trying to create their own demand by increasing the amount of “members” in their club. By offering a club, they are ensuring a certain amount of orders and can stabilize their price based off of member’s direct feedback and ordering habits. 2. Stuart Cellars would sell a bottle of wine for $18.20 3. Stuart Cellars is making about $1.50 per bottle or $18 per case. Here is the break down.
$18.20 per bottles selling price.
VC of $11.50 per bottle.
FC of $5.21 per bottle. For a total cost per bottle of $16.71. This leaves a gross profit per bottle of $1.50. Which is $18/case. Their gross profit would be $288,000 if they sell 16,000 cases.
The break even volume would be about 176,175 bottles or 14,681 cases. 4. The price you would pay for 10 bottles would be $360. If you were to buy 12 bottles you would pay $378. The implications for the customer are that you would get 2 more bottles of wine for only $18. $9 each. The implications for Stuart Cellars would be that your profit margin per bottle would be significantly less. They would also in all likelihood be losing money on the additional 2 bottles. In addition, by having such a big discount difference (10%) between and order of 11 bottles versus 12 bottles, Stuart is extending the frequency at which customers will order. 5. Stuart Cellars pricing strategy is to get long time customers that buy in bulk. By having a “members” club, they are looking to develop long term exclusive relationships with their customers. They are also looking to go after the “wine connoisseurs”. By doing this, they need to make sure that