Wednesday, July 13, 2011

How Bottle Prices are Set

Great article here by Terry Theise, a wine writer and importer, about how the cost of wine is determined. He makes two great points that you don’t hear too often - first, that “Those $6.99 bottles actually represent poor value, whereas a trade-up to $9-10 gives you twice the wine, because the fixed costs of freight and duties are the same.” That is, because importation costs are roughly fixed (it doesn’t really cost much more to ship wine that will end up being $5 a bottle than it does to ship wine that will sell for $100), spending just a few more dollars on an (imported) bottle can get you much better wine, or really, much more wine for you money, since a higher percentage is actually being spent on the juice, not on importation and distribution costs. Those costs can make the USA retail price exceed 200% of what it was originally sold for by the producer. Think about that next time you’re trying to decide between a $6 and a $12 dollar bottle (or a $12 and a $20). Second, when you buy from the big guys, you pay a premium for advertising, and when you buy from new wineries, you pay a premium for their startup costs. You can get more juice for your dollar, Theise argues, by “betting against the crowd,” especially by buying from small, family-based Old World wineries (that own their land and don't pay for anything but upkeep). Overall, this fits my experience - the best values I’ve found have been from small French producers. This is a good article, and a great little primer on wine economics - absolutely worth a read.

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