What determines the cost of wine? Explains by a professional sommelier

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

Eight main factors that make up the price tag in the store.

Today, in the diverse wine world, it is difficult for the consumer to make a choice, since in addition to many countries, regions, producers and styles, there is a pricing factor that remains unclear for many. You can recall how, in the era of the oil boom, Russian businessmen tried to get a vineyard in Tuscany and a chateau in Medoc, and then, realizing what kind of investment it was and how long it took to pay off, they went down to earth.

1. Vineyard

Planting a vineyard is an expensive procedure. It's just that the purchase of land in a particular region, especially in a prestigious one, is a pretty penny. First you need to analyze the soil, exposure, landscape, weather conditions and understand which grape variety is suitable for this area. For this, agronomists and consultant oenologists most often come to the rescue. Their royalties can go up to millions of euros per year (although here we are talking about celebrity winemakers such as Michel Rolland, Carlo Ferrini).

Then they buy vines in the nursery, plant and form a vineyard … And wait three or four years!

New vines will not give their first harvest immediately, so starting from scratch is expensive, it is a long investment. It is easier to buy an already planted piece of land.

The vineyard requires maintenance almost all the time, so no one can do without a permanent agronomist and his assistants. It is necessary to prune vines, form a plant, fight frost, drought, heavy rains, hail, diseases and pests.

What does a winemaker do in case of a small or even lost harvest? He raises the prices of what's left, or his next harvest. A striking example is Burgundy, which in the past seven years has only once achieved the right balance of quality and quantity. Hence the rise in price by 30-40%, depending on.

You can also buy grapes if you don't have or don't have enough of your own. Its price, accordingly, also affects the cost of wine. It varies greatly depending on the region. In large, mass-market regions, the price per kilogram starts from 10 cents, in the most expensive region, Champagne, in the most prestigious villages of the Grand Cru level, from 5 to 9 euros.

What matters is the reputation of the wine region, its prestige and the demand for vineyards.

You can buy 1 hectare of vineyard in Barolo or Burgundy at a price of 1 million euros, but the problem is that no one will sell it.

Therefore, all the recent transactions here were so high in price that it becomes clear: they offered such an amount that cannot be refused. But in the south of France or Italy, it is not difficult to acquire vineyards and even relatively cheap, but will there be a demand for such wine?

2. Labor force

This is one of the most "expensive" factors in pricing, so the cost of an employee, say, in France, can take up a considerable share of the cost of a bottle. The farm owners, of course, use the services of seasonal workers, machinery and rented tractors and equipment, but this can also reduce the quality.

There are times when the mechanization of harvesting is prohibited by law or the bottling of wine is allowed only within this wine region. However, in regions such as the Moselle (Germany), the Northern Rhone (France) or the Douro Valley (where port wine is made in Portugal), there is no question of any mechanization: the slopes are so steep that you have to build terraces and sometimes use a winch.

3. Production

For wine production, you need a sorting table for grape selection, a crusher-separator (for red grapes), a press (most often for white grapes), fermentation vats (oak, cement or stainless steel), aging barrels (if necessary), a bottling line …Much of this can also be bought used or rented, but there is also a chance of losing quality.

If we talk about the cost of aging containers, then, for example, a standard 225 liter barrel from the leading coopers of France Seguin-Moreau or Vicard will cost from 800 to 1200 euros. And here you need to understand that such a barrel is used by a premium manufacturer for no more than 4–5 years. The stock of barrels must be constantly renewed, and the old ones must be sold.

4. Packaging

Bottle packaging (size, volume, format, weight) matters, since a heavy massive container is more expensive, but it also looks premium, and for the mass segment they take the lightest and most standard calibers.

The capping can also affect the cost: a natural Portuguese solid cork made from oak bark costs from 1 to 3.5 euros, a pressed cork - 0, 1 euros. Synthetic stoppers, glass or screw stoppers also significantly reduce the price of wine. Don't forget about labels and boxes.

5. Transport and storage

It is cheaper to transport by sea than by land. Therefore, despite the remoteness, the wines of Chile, South Africa and Australia do not add much in price after being transported by ship, and then, as soon as they "sit" in the truck, they begin to rise in price.

Ideally, you should use a machine with refrigeration equipment so that the wine does not overheat or freeze. Those trying to save money on a cheap truck take the risk of spoiling the wine before arriving at the warehouse.

In the premium segment of wine (from 20 euros), transport costs can be up to 15% of its final cost.

6. Taxes, excise taxes and duties

As in many countries of the world, in Russia imported wine is subject to excise taxes (18 rubles per liter of still wine with a protected appellation of origin), duty (12.5% of the customs value) and VAT (18%).

7. Marketing

When the wine comes to the importer, it is necessary to understand by what means to sell it. Advertising and promotion in different distribution channels is carried out in different ways. For premium wines, these are tastings, exhibitions and master classes for a professional audience and connoisseurs, for retail - work with a shelf, promotions, etc. Already at this stage, the cost of wine, for example, from Italy rises from 10 euros to 25.

8. Distributors, retailers and restaurants

One should also remember about storage costs, where wine does not get better if the room is not climate controlled. And the frozen assets are not needed by anyone.

Of course, there is a small pool of wines, the cost of which cannot be explained by production costs or logistics. These wines include classic samples of Bordeaux, Burgundy, Champagne, legendary Tuscan and iconic Californian wines. The demand for the famous chateau and cru is so high that there are almost no margins for the markup.

The fact is that many wines really come from a unique vineyard, which cannot be expanded, but the volume cannot be increased. But all the same, these wines are bought up and drunk - often too early, when they have not revealed their great potential. In this case, the logic of the market works: the wine costs as much as the client is willing to pay for it.