Cheap Wine vs. Expensive Wine, Is it the Taste, Rating or Personal Ego?

By American Wine Appassionata October 13, 2016

Cheap Wine vs. Expensive Wine, Is it the Taste, Rating or Personal Ego?

All you have to do is walk through the aisles of a wine store or look through the pages of a white table cloth restaurant’s wine list to notice the puzzling difference in wine prices.

Wine is wine, or isn’t it? Wine is simply fermented grape juice, but its production is a finicky process. Very real differences in production exist between top and bottom-shelf wines. Expensive or cheap they both give you a buzz and sometimes a headache. They are consumed, packaged and shared for similar occasions.

Among Americans who drink wine regularly, only 12% spend $30 or more on a bottle weekly or monthly. Yellow Tail, a budget Australian wine, is the number one imported wine in America. The US imports more Yellow Tail each year than the total number of bottles imported from France. It is estimated that 90% of wine sold by volume is under $10 a bottle.

Why does expensive wine cost so much?

In fact, it’s unclear whether anyone can tell the difference between a $2,000 bottle of Screaming Eagle, Cabernet Sauvignon and a $3 table wine. In fact, most wine economists consider the matter settled. Blind tastings and academic studies robustly show that neither amateur consumers nor expert judges can consistently differentiate between fine wines and cheap wines, nor identify the flavors within them.  If a $10, $50, and $100 bottle all roughly tastes the same in a blind taste test, how do you explain their different price tags?

Grapes

Appellations, Terroir, Soil type, Vineyard, Grape varietal ….. are some of the most dominating factors in wine grape costs per ton. According to the 2013 annual crush report from the U.S. Department of Agriculture, a ton of grapes from the most bountiful district in the Central Valley averaged $340.00 while a ton of grapes from Napa averaged $3,68400 (a ton of Cabernet Sauvignon from Napa averaged just under $5,500.00 and some vineyards will charge as high as @20,000.00/Ton). While end-to-end vertical integration is prohibited because of so-called “tied-house laws,” which separate the three tiers of the system, Gallo has manufactured its own bottles for decades as one part of its economies of scale.

“Two-Buck Chuck” because it first sold at Trader Joe’s supermarkets for $1.99. The makers, the Bronco Wine Company, grow grapes in California’s Central Valley. The soil is considered too fertile to produce flavorful grapes, but produces high yields.  The process is an economy of scale par excellence. Once picked, grapes are processed and bottled in “a high-speed bottling plant capable of churning out 18 million cases of wine a year, double the annual production of all the rest of Napa Valley.” Bronco also buys surplus wine from other California vineyards at bargain prices. 

All the wine is blended together, regardless of its origin. As of 2003, Bronco processed 300,000 tons of grapes to make 20 million cases of wine, of which a quarter are “Two-Buck Chuck” wines. 

Winemaker

A well-known winemaker is like a Hollywood star, some receive higher payments than others.

For star winemakers, it is not uncommon to consult to for several wineries 5, 10 or even more. The cost of and fees paid to winemakers can vary tremendously as low as $60,000 up to $250,000.00 annually with a few exceptions on both ends.

 Oak Barrels

Some wineries age their wine in oak barrels. There are several different types of barrels, Hungarian, American, French or other oak types. The price varies from one to the other, for example: 

  • Average cost of 1 new Hungarian Barrel is:                   $450.00
  • Average cost of 1 new American Barrel is:                     $750.00
  • Average cost of 1 new French Barrel is:                       $1,000.00

Each barrel Contains approximately 25 Cs. of wine. Each case holds 12/750ml bottles for total of a bit under 600 bottles.

Doing the math, if a winery uses new Hungarian barrels then there is an additional cost per bottle of: $.75 compare this to another winery that uses new French oak, the additional cost per bottle will be about $1.65

Cork & Foil

Prices per bottle ranges from $.50 to $1.50

Bottle

Bottle prices range from $.50 to $2.00 depending on the quality of the glass, shape, bottle weight and the depth of the punt. Bottling is an expensive process; most wineries do not own their own bottling line. Smaller wineries rent time on a mobile bottling truck that cost an average of $1,200/Hr. with a min. of 4 hour rental time requirements.

Wineries producing 500 cases or less would be impacted the most from such expenses. Ultimately, that would be reflected in the retail price of their wine.

Label

Label prices range from $.50 to $2.00, depending on paper quality, number of colors, printing method, application, which is usually automated and combined with wine bottling. Without taking into considerations label designer and filling fees.

 Marketing/Distribution Cost

Approximately 50% of most wineries productions are sold to distributors at 50% of their SRP. The other 50% usually sold directly to from the winery through their tasting room or to their wine club members.

Supply & Demand vs. Wine Rating and Personal Ego

Wine critics play a major role in the wine industry. A wine that receives 100 points from a critic such as Robert Parker will quickly become in high demand. If the same wine is produced in small quantity, then it becomes a frenzy among consumers to obtain it for personal ego.

Conclusion,

You, as a consumer, don’t need anyone in the wine business to tell you what to drink. The industry thrives on people’s anxiety about buying good wine, but critics aren’t very good at identifying it, they rate wines based on their own personal preference.

Feel free to buy a cheaper bottle of wine from the bottom-shelf of your local wine shop, and don’t let anyone tell you that you shouldn’t enjoy it. You’ll be just as happy with it.

 

Cheers!

The Wine Appassionato





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