Before we get into the details of what goes into the cost of wine, let’s address the question I have heard countless times throughout my career. “Why are some wines so expensive?”
Some of the most popular wine brands are inferior, mass-produced products made by huge wine conglomerates with endless advertising budgets influencing the less-educated consumer, creating ignorance and misperceptions about wine.
Case in point: Rose wine. Rose carries a negative stigma because it’s often viewed as an unpleasant, sweet, fizzy pink wine senior citizens drink. A true rose is the furthest thing from sweet and fizzy. A true rose is dry, with fruit and acidity. The comment I most often hear when someone first tries a high-quality rose is, “I did not know rose could be dry,” and they become fans.
Raw ingredients
Purchasing grapes in bulk can be less expensive than growing them on the property and harvesting them on site.
The quality of the grapes purchased can affect the price. High-quality grape prices can vary from $1,000 a ton to $10,000 a ton, depending on the quality. The grapes’ cost alone can add anywhere from $1.00-$14.00 to a single bottle’s production cost.
Aging
Is the wine aged in oak barrels or stainless-steel? An oak barrel costs between $900 to $2000, while French oak is twice as expensive as American oak.
Oak barrels give wine oak flavor for four to eight fills, and the oak flavor diminishes with each use.
Over 30 years, expect to spend at least $4,500 or more replacing each barrel. Do the math: if a winery uses 100 barrels over 30 years, that is $450,000 in barrel costs alone.
A stainless-steel wine barrel costs around $900 and lasts much longer, resulting in much lower costs.
The wine label
How much work went into the label? Is it a simple label, like the Saldo wine, or is it like the Meeker Handprint Merlot, where someone painted their hand, then pressed it on each bottle to imprint a colorful handprint?
Marketing and advertising
The average business spends 5% – 12% of their budget on marketing. So, if your winery generates $5 million in revenue, 10% of your budget is $500,000.
According to Statista.com, Anheuser-Busch spent $428 million on advertising in 2019.
The markup
Retail markup averages 50%, and restaurant markup averages 75%.
Money-saving tip: Ordering direct from the winery helps the winery make a higher profit while saving the consumer money.
Labor
A five-star restaurant requires higher caliber staff than a fast-food restaurant.
A top-quality winery cannot produce premium wines without a high caliber staff, who command a higher salary, adding to the cost of the wine.
Miscellaneous costs
Salaries, utilities, the lease, corks, boxes, water bills, taxes, and other miscellaneous expenses add up quickly.
Real estate
Famous wine regions, such as Napa Valley, Burgundy, or Bordeaux, command higher prices for their wines than less famous wine regions, just as a house in Beverly Hills is more expensive than a house in a less-prestigious location.
Putting cost in perspective, the price per acre in Napa Valley is $300,000, while in Virginia the price per acre is $15,000.
Is the wine made from old vines?
A high-quality old vine wine is more expensive than its young vine counterpart. There are several reasons behind this, but in short, old vines produce better quality grapes, which results in higher quality wines, adding to the cost. Think of old-vine grapes as the creme de la creme of grapes.
Does the winery have a Rockstar winemaker?
Reputation adds to the cost: Established winemakers command a higher salary than lesser-known winemakers, which contributes to the cost of a bottle of wine.
Awards and accolades
A winery with award-winning wines can command higher prices, just as an Oscar award-winning actor commands a higher salary.
How does vintage contribute to the cost?
There are two basic approaches to making wine.
One approach called vintage variance means giving nature more influence over the wine. Each vintage depends on the quality of the fruit, with the weather playing a key role in the success or failure of a vintage. Therefore, certain vintages are more prized and expensive than others.
The other approach, mass-production, provides consistency and lower cost, but like anything mass-produced, the quality suffers.
Is the wine estate-bottled?
The following are terms found on wine labels that may confuse the novice, so let’s do a quick review.
Estate wine: Can come from many vineyards if they are all owned or controlled by the actual estate, the winery.
Single vineyard: The wine in a bottle came from a single vineyard site.
Estate-bottled: United States law defines “estate-bottled” like this: 100% of the winemaking process must take place at the winery, and the grapes must be owned by the winery.
Estate-bottled represents the highest quality control, which contributes to the cost.
Yield
How much juice is available to make wine? Less yield equals less wine to sell, which means less revenue. Wineries charge higher prices to compensate for the lower yield.
Vineyards producing higher-quality wines may reduce the number of grapes on the vine by pruning. Why do they do this? For better quality grapes. Fewer grapes on a vine mean the remaining grapes receive more nutrients resulting in higher quality grapes. This leads to better tasting wine and a higher retail price.
To put the number of grapes lost from pruning into perspective, consider this: pruning can reduce the average yield of five tons of grapes per acre to just over three tons to make sure the vine’s remaining grapes are better to make higher-quality wines.
Grapes are pressed to make wine. The more force used during pressing, the more unpleasant things, like tannins and solids, pass into the grape juice. This results in a higher yield, but lower quality juice. Using minimal pressure prevents those unsavory things from passing into the juice, resulting in less yield, with higher quality grape juice. Less yield contributes to the cost.
Are the grapes hand-picked or machine-harvested?
Let’s clarify the two terms. Hand-picked means just what it says; the grapes are hand-picked using hand tools. Hand-picking requires a lot of labor, and workers need training, which adds to the cost.
Machine-harvesting is one of the most significant advancements in the wine industry in the 20th century.
Hand-picking is slow and laborious, but machines can harvest grapes at speeds no human can match. Machines can harvest an acre in under an hour, while humans may take over five hours.
Hand-picking is a process considered gentler for the vines and grapes, and wineries often reserve this method for their flagship wines, because of the higher costs resulting from manual labor.
Are expensive wines worth the price?
Those who have less exposure to high-quality wines may not taste the difference between lower quality and higher quality wines, so more affordable wines may be the answer.
As one becomes exposed to more high-quality wines, their palate develops, and one will understand why the best wines command the highest prices.
Wine is like any other product; you get what you pay for.
