How is Wine Priced?
Wine prices vary wildly and considering the fact that expensive wine doesn't always taste better one can't help but wonder: how are wine prices determined? Who or what decides which will be expensive and which will be a bargain?When it comes to the world of wine simple questions rarely have simple answers and price points are no exception. Many factors go into determining what the final price tag on a bottle of wine will be. It's a complicated and varied equation but here are the major players.
The Grapes
The quality of the grapes is one of the biggest factors affecting the final price of the product. Grape varieties with intense, complex flavor usually yield fewer tons per acre and cost quite a bit more than blander grapes bred specifically for volume. Better grapes make better wine and grape prices can range anywhere from $100 per ton to upwards of $6000 or more, which breaks down a cost of $0.50 to over $10 per wine bottle.
Production Costs
Oak barrels for aging cost money (with new ones being more expensive than old ones or those in poor condition) as does storage of the barrels, maintenance and utilities, staff salaries, optional treatments like picking and sorting grapes by hand vs by machine, and packaging (bottles, corks, labels, and boxes). Add another $1 to $5 per bottle.
Marketing/Distribution
Getting the word out and moving the wine to stores where people can buy it means paying for advertising and working with distributors and retailers, all of whom take a cut. This can add anywhere from $1 to $10 or more to the cost per bottle, depending on how much is spent on ads, how far the wine needs to travel, etc.
High Scores/Supply and Demand
This is the most subjective of all the factors and is the catalyst behind most of the highest prices in the wine market. The marketplace determines fair market value based on how much people are willing to pay for a particular bottle or brand of wine, regardless of what the calculated price should be. High scores and good reviews from respected experts, a popular label or winery with a reputation for quality, marketing that specifically targets the luxury demographic, and rare or limited supplies can all combine to drive wine prices into the hundreds and even thousands of dollars.
