As exotic and esoteric you might consider wine to be, even here the principles of economics still apply. While there are many factors that influence the price of a wine but in the end it depends on supply and demand – how much wine is available for sale, and how much the consumer is willing to pay for it.
Factors
On the winemaker’s end there are various costs associated with the production of grapes and wine – equipment and machinery to tend to and harvest grapes, labour costs for harvesting when machine picking isn’t possible, barrels and fermentation tanks, bottles and bottling machinery… in the end the producer needs to be able to sell their product for a price that can cover these costs, ensure their livelihood and prepare for next year’s vintage. The good folks at WineFolly cover some of these supply-side factors in this article.
To mitigate the risks and costs of production, a thriving market for wine investment comes into play, but like all markets there are fluctuations. A wine investor gives his two cents on the matter in this article.
On the consumer’s side I usually observe two factors in play – taste and fashion. Obviously the consumer should have an idea of what they like and dislike (and if you don’t, you should start taking notes) and will adjust their buying habits accordingly.
Fashion is the more unpredictable factor. Market conditions can change seemingly without rhyme or reason, and winemakers have to change their practices to meet demand. A reflection of this is the changing preferences for certain styles of wine – in the past Chardonnay wines were known for being very woody and buttery, due to the heavy application of oak and malolactic fermentation. Only relatively recently has the style shifted towards crisp wines with emphasis on fruit characters.
Media plays a large role as well – when a character in a movie is seen to express their distaste for Merlot, sales for that particular wine can fall. Or a music artist who boycotts a particular brand of Champagne. Or another who sings about Moscato.
JayZ with a large format bottle of Ace of Spades Champagne.
One factor that isn’t usually considered is the proliferation of so-called international varietals – grape-growers around the world feel they must plant these more well-known vines, to the exclusion of others. Evidently they are worried lesser-known wines wouldn’t sell. What we may end up losing is the exotic element that makes wine so interesting, and end up with a homogeneous product that tastes the same regardless of where it was produced. Call it the “McDonaldisation” of wine.
Branding is the last major factor to consider in regards to pricing. In effect, a wine’s brand is a legal monopoly. Only Chateau Lafite-Rothschild can produce wines under the Chateau Lafite-Rothschild label. I suppose you could consider it a more mundane term for “terroir”. The more greatly acclaimed the terroir, label or chateau, the higher the price.
Criteria
So why the economics lecture? I just want to create an awareness that the price on the bottle isn’t solely indicative of the wine’s quality. This is why I recommend people try a price tasting.
In classes it was suggested to use the following as a guide:
- Inexpensive: $0 – $10
- Mid-priced: $10 – $20
- High-priced: $20 – $50
- Premium: $50 – $100
- Super-premium: $100+
The simplest method is to take $100 to your local cellar, and pick out wines from the $10, $20, $30 and $40 brackets. Keep to one varietal, and try to match the regions and vintages as closely as possible.
For a more dramatic tasting, set aside $500 and try wines in the following ranges – $10, $50, $100 and $300+. I suggest getting a few friends together to pool the costs and ensure your tasting is in good company.
If you can find it I would suggest you not only stick to one particular varietal, but also to a single producer – many labels today offer wines at various price and quality tiers, from the every easy drinking to the regal jewel that represents their crowning achievement. Consider Penfolds – nowadays it’s thought to be the pinnacle of Australian wine, but walk into any wine cellar and you would be surprised how many affordable wines are available under the same brand.
I won’t tell you what to expect, but I would suggest you focus on the criteria in the Rational Wine Note as usual. Make your judgements, compare notes between wines, and think how they differ and why this makes one wine more enjoyable than another. However you should be able to sense a gradual improvement in quality as you go up in price.
Like this, but reverse the order of numbers and add a dollar sign in front
In particular I would suggest you pay attention to how all the elements are balanced, and the length/finish of the wine. A good wine should have an irresistible profile and seem to linger forever on the palate. If you don’t believe me, consider the opposite – would you be impressed with an amazing taste that disappears before you can imprint it in your memory?
Anecdote
Early in my foray into the world of wine I tried a couple of Pinot Noirs that almost caused me to reject this varietal for good – they were pale, watery and medicinal. But I was a professional and it was my job to be knowledgeable about all wines, so I sighed fatalistically and wrote it off as one of the downsides of the job.
Then I was presented with a pricey Pinot Noir from Tasmania, from the 2012 vintage. Never before had I come across a Pinot Noir with such depth of colour and intensity of flavour. If I were handed a glass blind, visually I would have picked it as a Shiraz, but that was where the similarities ended. It was like nothing I had ever experienced before.
Since then my understanding of Pinot Noir has been completely readjusted. I have tried more samples, ranging from the Old World of Burgundy, France to the New World of California and New Zealand. Lesson learned – all it takes is one good example to alter your prejudices. It just so happens that sometimes there is a price to pay to get to that one good example.
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