Understanding Wine Pricing

25/03/2019 Pricing of wine has always raised eyebrows, but there's always a reason behind it all.

Pricing of wine is often known to be a grey area. A pricier wine is always questioned about why it costs what it costs since there are some beautiful wines available on the cheap side too. This is because there is a huge gap in the understanding of value and quality in the wine sector, which brings about the confusion and doubt about wine pricing.

For wines that have been aged gracefully over the years, it is only fair to shell out a few extra bucks towards them. Aged wine is rich, suave and dense and this attracts wine enthusiasts who are ready to pay a heftier price, as they are oenophiles and realise the value and quality of these wines.

There are a number of factors which go into pricing a wine and delve deep into why certain wines cost more and how their price points can be justified.

The basic concept of pricing

The basic concept is that the wineries, after making the wines sell it to the distributor at a price called ex-cellar price, which includes the cost of vineyards, sales, marketing, loans, real estate, and building and administration prices. The distributor then, as per his portfolio, buys wine as per his needs, and when finally, the retailer is sold the wine, the retailers sell it at a higher price, often considering his business model and zip code. This is the basic cycle that the wine trade goes through. However, there is much more to that.

Family wineries and Private Entities

For many wine producers, developing a vineyard and winery together might have been a very old family business, and they might be carrying it out with a lot of sacrifices made in the past, hard pills swallowed, as well as, putting in timely efforts so that the wine they make turns out to be of impeccable quality. For some wineries, it’s a bottle of sacrifices and hard work which they produce and so, demanding a price for that, is, nothing but justified. Such wineries with a great amount of experience in winemaking, produce high-quality wine, whose high price point is justified.

Privately owned wineries need not produce quarterly reports or open books to reporters, so they, as per their producing standards and quality, determine a price at which their wine can be sold.

Quoting an example from Food and Wine website, Mark Oldman pointed out while he was showing off a Stag’s Leap ‘Cask 23’ Cabernet Sauvignon, the bottle commemorated the 40th anniversary of the Judgment of Paris. During that tasting in 1976, Stag’s Leap shocked the wine world and beat out a number of Bordeaux giving American wine some real credibility on the international stage for the first time. Hence, this is one of the major factors why some of the best wines demand hefty costs to be paid.

Vinomics

There are also other factors that push the cost to some extraordinary heights. This is where ‘Vinomics’ comes in. The Vinomics will justify why the wine costs the way it does, considering the three basic things- Time, Oak and Terroir.

Diving into Vinomics, one of the core constituents in determining the price of wine is ‘time’. There are some reserve wines which need to be stored in oak barrels for a longer period of time and the more they are stored in oak barrels, the richer the taste becomes due to the level of oxidation. Those oak barrels themselves are quite costly, which adds up to the price of the wine. A wine stored in an oak barrel tends to last longer, in turn costing more than others.

The terroir of wine is also a reason for a differing price point. After all, it is the environment where the wine is going to be grown. The soil quality, climate, irrigation, grape quality, and other factors, in turn, determine how much ‘extra’ care viticulture will require. At times, due to weak soil quality, there might be times wherein extra pesticides or extra ploughing might take place. Mixing the soil well with everything it requires, and doing it on a timely basis, requires different resources. The importance of terroir lies because ultimately the grapes are the main source which will be converted to wines, so each and every factor required to perform sound viticulture is included in the wine cost.

Moreover, there are some micro-wineries which can only cultivate specific grapes considering the terroir. So, chances are that they might be missing out on cultivating those grapes which could easily fetch them good returns. But due to the restricted terroir, they can only grow a specific grape. Hence, to earn their bread and butter with a little jam as well, they price the grapes/wines high, which results in costly yet worthy wines which are scarce, yet are being produced by efforts of the winemakers.

Considering core Vinomics, the supply and demand of a certain wine, also quite well determine how much will it cost. Current wine preferences, tastes, and trends in the wine world add up to the demand of a certain wine and in turn the supply. Some brands receive increased demands because of quality and innovative publicity.

Corks

The other factor that plays a key role in contributing to the cost of wine is the cork.  As per the Prospect website, cork manufacturers put a lot of work into detection. Trained noses are brought in to sample corks at random, in a large batch and to put aside any that cause suspicion. Guaranteeing the health of each and every cork is possible, but it costs much more to pass each cork under the nose of highly trained experts. When the corks are manufactured so meticulously, it is certain that they will be sold at a higher price point, and the winemakers in order to compensate their costs, will definitely incorporate those costs in the price of the final bottle of wine.

Labels

The creation and printing of wine labels is also an area that needs to be considered. What it depends on is the type of label created. One is the cast gloss paper which has an extra coating applied to it which makes it extra glossy, giving it a mirror-like finish and the other one is an uncoated paper which is quite common in wines. The extra glossy paper costs more than regular, uncoated paper.

Augmented reality is a concept, which is very much used in printing wine labels. Brands like 19 crimes have implemented it, where the characters on wine label come alive and narrate the wine story. So, when such technological inclusions are done on the wine label, it is likely for the price of the wines to be high.

Wine Publicity

Sommeliers, wine experts, renowned bartenders are always going to have a say in how a particular wine costs. They are here for that.  And after tasting that wine, they will definitely want to rate it, give an opinion about and be truthful in their recommendations of a certain wine, considering that wine recommendation will carry along their palate tastes to other wine lovers. So, when wine experts rate a certain wine or publicize it highly, then there are certain wines which eventually earn that prestige because it is highly recommended by the experts. So, the ‘talk of the town wine’ isn’t coming that easily, as it will then cost more. So, this is yet another factor of answering the question of why wines cost more.

Summing it up, it all depends on these minute factors which qualitatively and quantitatively add up to construct the price of the wine. After all, it’s all worth it in the end, because nothing compares to the feeling which occurs after seeing those joyous sparkles and pleasure textures of the wine.

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