What a difference a penny makes.
Trader Joe’s Co.’s decision last week to boost the price of its iconic Charles Shaw line of wines could have jeopardized sales by undermining the popular “Two-Buck Chuck” meme that helped drive sales of the $1.99 bottles.
But in boosting the price of a bottle to $2.49, which still rounds down to “two bucks,” the nickname – which was never part of Trader Joe’s marketing – can live on in the popular imagination as “Two-Buck Chuck.” Had the price gone higher, the wine might have evolved to “Three-Buck Chuck,” as it is known in some other states where the price is higher.
“There’s enough ambiguity in ‘two buck’ to support $2.49,” said Lars Perner, an expert in marketing and consumer behavior and assistant professor at the USC Marshall School of Business. The moniker, he said, should live on.
The Monrovia grocer is the exclusive retailer of the Charles Shaw brand, owned by Bronco Wine Co. of Ceres, and sells about 5 million cases each year. It has sold more than 600 million bottles since it first hit the shelves 11 years ago.
“We work hard to have every item in the store at an intersection of quality and price that highlights outstanding value,” said Alison Mochizuki, spokeswoman for Trader Joe’s. “In general, our retail prices change only when our costs change.
“We’ve held a $1.99 retail price for 11 years. Quite a bit has happened during those years and the move to $2.49 allows us to offer the same quality that has made the wine famous the world over.”
Steve Stallman, president of food and retail consultancy Stallman Marketing in Santa Clarita, said the retailer will likely sell fewer bottles at the new price, though he said it’s still a good value and likely won’t lead to any massive fallout with shoppers.
“I think they will sell less,” he said, “(but) loyal Trader Joe’s people understand value, and they’re going to (still) see this as a value. People are going to understand.”
The wine has been a fixture at Trader Joe’s since the chain scored a deal with Bronco, one of the country’s largest wineries, to carry the budget label in Trader Joe’s stores in 2002.
Since then, “Two-Buck Chuck” has taken on a life of its own, Stallman said, due to a mixture of low price, palatability and the catchy nickname.
Its success also spurred competition from other winemakers looking to tap into the low-cost wine market and helped make such budget wines explode in popularity among cost-conscious consumers.
The growing demand for cheap domestic wines was fed by an abundant supply flowing from California winemakers, which helped keep prices down. Those costs started to rise last year when poor growing conditions in 2010 and 2011 led to atypically small California grape harvests.
As a result, the cost of Charles Shaw wines of those vintages, now finding their way to shelves, coupled with persisting high demand has put a strain on pricing, said a spokesman for Bronco Wine, which has about 45,000 acres in California’s Central Valley and produces dozens of labels.
In addition to higher grape pricing, Stallman said Trader Joe’s is also likely passing down higher costs of distribution due to fuel prices. A Trader Joe’s spokeswoman declined to cite specific reasons for the cost increase.
The price rise in California followed hikes in other states, where prices for the Charles Shaw label have gone to as much as $3.79 a bottle. California was the last state in which the retailer charged $1.99.
The wine has no doubt helped to increase awareness of the supermarket chain, Stallman said, though he doubted it was a profitable item when selling for $2. So even if the grocer sells fewer bottles at a higher price, it is likely not jeopardizing profits or turning away would-be shoppers en masse.
“Someone who just goes there for the Two-Buck Chuck – that’s a very small part of their business,” he said. “I don’t think it’s going to have a big impact on their bottom line.”
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