The costs of a bottle of wine.

We hear this a lot. No wine is worth that much. I would not pay more than this much. That is ridiculous to pay that much. No wine should cost more than that much. Mostly all by folks who don't own a vineyard or make and sell wine. Now that's not to say there is no merit in what they are saying but there is a lot more to making wine and the costs associated with it than most people have any clue about when making these sweeping judgmental statements. As you will see there are a lot of variables to the cost and not all have to do with good wine.

Lets start by looking at one end of the market (upper middle). Napa Valley gets approximately $300,000.00 per acre for a decent vineyard. On top of that the price per ton of that famous Cabernet Sauvignon is around $5,000.00 and can at times go even higher. Then there is the issue of yield. Most vineyards used for good to premium wines could yield much more than they do but low yield vines are considered to produce wines of better and more concentrated flavors. Napa Cabernets are pruned to average approximately 3 tons per acre. So at 3 tons per acre for an investment of $300,000 that's a long payback. Next up is the cost to run the vineyard. Is the vineyard on a hill or on the flat and can it have machines do most of the work or based on vineyard practices of choice is it all done by hand? Asking around it seems using an annual median cost of $7,500.00 per acre for labor, benefits, depreciation, taxes, materials, fuel and maintenance, utilities, licenses and fees is close enough for this exercise.

Next up is free run versus second press juice. Each grape has a limited amount of juice in it. When the skin is broken, some of the juice will flow out. If you squeeze the grape a little, more juice flows out. And if you squeeze the grape hard, nearly all the juice flows out. Is this juice all the same? No way. Juice that comes out from light pressing or the earliest part of the crush will be cleaner, fresher, more delicate and more aromatic than juice that was squeezed to death and extracts bitter oils from the seeds and skins. Of course, less juice means there are fewer bottles of wine to pay for the winery’s operation, again affecting the price of a bottle.

Wine can be fermented in stainless steel, plastic, glass, concrete, clay or wooden barrels. The wine can also then be aged in any of these. Fermenting or aging the wine in oak barrels adds flavors of spice, vanilla, toast, caramel, as well as changing the tannins and color. Oak can make for some delicious wine, but it is very expensive. A new French oak barrel can cost over $1,000, which adds about $2.50 to each bottle of wine. When you add in the extra labor that barrels require (topping up every week for months or years, racking, storing) this can add up to over $5.00 per bottle. An 8,000 liter stainless steel tank starts at $9,000.00 and as you add features like a door, $1,000.00 or cooling jacket $2,500.00 and the list goes on.
Standard grape crusher destemmer with full or partial destemming, full, partial or no crushing, for high quality wine start about $20,000.00 and up to well above $75,000.00. Now throw in conveyors, sorting tables and all the pumps, hoses, stainless steel fittings and miscellaneous equipment for another $100,000.00 and you have a median setup. Median you say, yes median. We have not yet added bottling lines at around $40,000.00 and optical sorters that can cost in excess of $150,000.00.
One thing most people don't think of as a cost factor is ageing. Not all wine gets better with age. Most wines, in fact, are most enjoyable the day you buy them. Some wines, however, can mature and develop interesting flavors with time. But aging wines isn’t free. The winery must build storage space with proper temperature, hire people to manage the aging wine, and postpone sales by keeping their product tucked away in hiding for years.

Add to all this the cost of glass (the bottles), labels, closures and caps and you have a million variables to factor in.

A standard Bordeaux bottle can cost as little as $0.50 and as much as $5.00 (some specialty outside this range) The cost for the total bottle package is between $2.00 and $10 roughly.

Lastly (at least for this article) is the cost of advertising and selling and distribution and tax's. Tax in California is a small percentage but some places like England it is 70% of the cost of a cheaper bottle.

So there you have about most of the hard cost of what goes into a bottle of good wine. Our brains are tired and we need a drink, so add up the numbers and let us know what a good bottle of wine should cost.

Maybe this is an easier way to put a rule of thumb to it. Grapes, including the labor involved in growing and harvesting them, are usually a winery's biggest single cost and up to 60 percent of the production expenses in California, and frequently the most variable one from high-end to low-end wine.
One common formula wineries use for pricing estimates, is that a bottle of wine should cost 1/100th of the price of a ton of grapes. For example, a winery that paid $4,000 for a ton of Cabernet fruit would charge $40 for a bottle of Cabernet, implementing this formula. Of course this does not really take into account the three tier system for the distribution and selling of wine.

Now that all our brains are aching lets look at the fact that a bottle of wine is worth what the consumer is willing to pay. Whether its a $20 bottle or a $600 bottle, if someone is willing to buy it then that's what it is worth at that moment.

Yes its true that some wines are sold at prices that far exceed the cost but as long as they can sell that wine at those prices then who are we to say its not worth it,. The market obviously disagrees with us.  There is also the exclusive nature of a premium or limited release that someone in the back room decides what they think it could be worth. Again if it sells then they were right.

So back to the original question, 'how much should a bottle of wine cost?' We like the 1/100th concept but as you can see there are variables can override that and of course the marketing department will make the call no matter what we think. 

We think that whatever you are willing to pay is the price that is best (for you). Lets face it. Someone who earns a couple million dollars a year has a different threshold than the rest of us wage earners so just know that good wine is made in all kinds of price ranges and the $45 bottle can be every bit as good and score just as many points as a $600 bottle. So enjoy what you want and sneak a cheeky taste of the more expensive ones when you can just because you can.

Happy Wine Adventures,

Cheers,

WineWalkabout