Do you ever wonder why there’s such a huge range of prices when it comes to wine? Why can you find a bottle of $5 Chardonnay on a shelf next to a $200 bottle? Is there really that much difference in quality? It’s a good question, and one that I hear a lot. When it comes to the price assigned to wine, there are dozens of factors that affect it. However, for our purposes today, I want to go over the three main categories that make the biggest impact: location, production method, and marketing.
The location where the wine is produced is the least negotiable category and is more or less out of the producer’s control. These are the biggest factors related to location that determine the price of a wine:
Cost of land If a country is known for making wine, such as France, it’s likely that wines produced in that country will be more expensive than those from a lesser-known wine producer like Portugal. In addition, differences in vineyards within a country will also affect the price. In Burgundy, France, for example, there can be 10 different prices for vines that are located only feet away from each other. Much of this is based on a rating system that determines if land is Grand Cru (best plot of land), Premier Cru (second best plot of land) or village level (basic plot of land.)
Labor costs and taxes The cost of labor and the impact of taxes also make a big difference. Compared to Spain, the labor costs in California are very expensive, which means wines that come out of this state are going to be more expensive than a wine coming out of Spain if all other factors are equal.
Nature The climate and natural disasters are always a factor for producing and pricing wine. If the weather is perfect and yields are plentiful, the prices on wine will be lower. But if there is a frost or a natural disaster, prices for the wine produced in that area will likely soar.
Transportation We can’t forget the cost of delivery and import tax! The same bottle of Chianti you had in Italy for 10 euro will easily be over $20 in the states after you factor in taxes and transportation expenses.
While producers can’t control the weather or do anything about taxes, they can adjust the next factor that determines wine prices: production method. Production method involves both the yield of the vine and how the wine is aged.
Yield Vines can produce a lot of grapes, but the more grapes they produce, the less intense the flavor. That is why some wineries limit the number of grapes they produce to boost the flavor of their wines. Some will go as low as 1 ton of grapes per acre, which translates to only 720 bottles. Obviously, the prices on these bottles will be higher than those from a bulk winery that produces 10 tons of grapes per acre!
Aging What type of barrel is used to age a wine and how long it’s aged for can also drastically change the price of that wine. While an American oak barrel costs around $600, a French barrel cost twice as much. And, the longer the wine is in the barrel, the longer the winery has to wait to see a profit form that wine. So you see how a wine aged for six months in an American barrel would cost a lot less than one aged for two years in a French barrel.
Marketing is the biggest factor when it comes to wine prices and is completely under the producer’s control. Marketing can turn ugly frogs into princes and it can turn a cheap(ish) wine into one that is in demand and can be sold for a whole lot more.
Packaging How many times have you bought a bottle of wine because you liked the label? Come on, admit it! Almost everyone has. Put a fancy label on it, call it a limited edition, put it in a nice box…all of these can immediately boost the price on a bottle of wine.
Critical acclaim If a bottle scores well with a major wine critic, the producer will shout it from the rooftops and the price of the wine will invariably increase.
Supply vs demand If a wine has a very small production, it will have the illusion of something that’s hard to get and will command a higher price. Older vintages that can’t be readily found will also cost more.
Piled a lot of information on you, didn’t I? Let me distill it down to the main takeaway: spend your money where it matters! If you’re going to fork over the money for a higher-priced bottle of wine, make sure you’re doing it for a wine that comes from a location you love and enjoy and that has been produced with integrity and care. Don’t overpay for marketing or glowing reviews the producers are pushing.
This being said, if you’re buying wine as a gift, you may want to flip this strategy around. When you focus on the marketing, you can amp up the “wow” factor with a well-recognized name or fancy bottle instead of paying more for the intangibles.
What the video here - https://www.youtube.com/watch?v=NkzaXa8YeV8&feature=youtu.be