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102 p r a c t i c a l w i n e r y & v i n e ya r d n O v e M B e r 2 0 1 4 w i n e b u s i n e s s of minimal, if any price increases. On the direct-to-consumer, the specialty, luxury, more limited-scale wines, we have been instituting some measured price in- creases, and believe it or not, they have been received, honestly rather smoothly. ■ What we are doing instead of raising prices, we are reducing the $pend. We typically $pend around $15 per case across the board. We are reducing that spend in terms of market support (cutting promotional costs), fewer sales, deals with distributors. ■ Where it is challenging is when you are in low-premium to sub-premium. Then it is very elastic and difficult to raise prices. ■ No, not really. We addressed it the same way I had to do it in the past, by lowering the appellation, in order to do it, going to California appellation, in order to keep the cost down and to open up the ability to buy higher quality wine at a more rea- sonable price. ■ One key element in the wine business is being behind the demand curve. Those people who do not get too far up the de- mand curve, who do not put too much pressure on themselves to drive volume, because they have made improvements in their vineyard or building out their winery, will have a much better time being able to take price up. Those people who are in the growth mode and are in- vesting in infrastructure will struggle because they build the capacity and the need to drive that volume. Those people will struggle taking price up. ■ You take price up when you can, and sometimes it is what your competitors are doing, and what the consumer will do and what the retailer will absorb in terms of making it work. It is an ongoing game that you look to take price up. We have been able to do it in some places, and in other places, no. ■ We do not let our input costs drive our pricing strategy. The competitive land- scape drives our pricing strategy. That said, we actually do not anticipate sig- nificant input cost increases in the short- term. However, we will continue to look for opportunistic price increases and have made some recent moves in pricing. ■ Everything around pricing involves competitive tasting. Absolutely. I do pay attention, and we price within the com- petitive set. We survey constantly and are looking at where we are within our group, and we definitely move within that group. Q: What are you doing about your water usage, and do your strategies address both current and future shortages? ■ I think Mark Twain had a great saying, "Whisky is for drinking and water is for fighting over." We are going through a very difficult time, and climate change is going to have an impact on our business regardless. It is happening. ■ The biggest thing for us is probably quality of water going forward. But, that is going to remain a big concern because we do not think we are getting the "Mother Nature" natural rain flushing the soils and getting the salts out. Historically it has cost us about 6 gal- lons of water to produce 1 gallon of wine. Give or take, you know, just an average right? This past year it took 3 gallons of water to make a gallon of wine. We have reduced water usage with our barrel- washing program. We have had some innovation where we used to wash barrels with clean water in the various three phases. Now we wash the dirtiest barrels with the dirtiest water, the less clean barrels with less clean water, and the cleanest barrels with the cleanest water. ■ We recycle all of our water here at the winery, and we use that for irrigation, and we have wells. ■ The biggest thing we have done recently