Peeking Under the Wine Industry’s Skirt

What exactly does it mean when a group of talented folks can release a wine brand upon the world that at once delivers wine that is the clear equal in quality of wines priced at double and three times their wines, and yet they can make a good living selling this wine?

It doesn’t quite mean that Fred Franzia is correct ("no wine is worth more than $10"…or something to that effect), but it might mean that many of us who are looking for wines well above the average in quality are often paying too much for the privilege of rising above the commonplace juice.

There are so many factors that go into the assessment of a product’s value: scarcity, reputation, pre-conceived notions of what is "good", the product’s appearance, what others say about it, what it would take to duplicate the benefit we believe a that product will bring us. The list is long.

One of the things that was driven home as I walked out of a meeting with a wine marketer today was that we are probably paying too much for REALLY good wine. I also learned that in order to confirm this you need to be willing to search for value.

Value in wine is not something that is relatively low priced. Value is experiencing something that far exceeds your expectations for quality at the price you paid for it.

The dirty little secret in the wine industry is that if you lift up the industry’s skirt, underneath which resides its scandalous and tantalizing secrets, you find a product that, even at the highest levels of quality, is priced far beyond …I mean REALLY far beyond…what it cost to produce.

What you find when you look underneath the wine industry’s skirt is not quite obscene….But it sure is a little dirty.

Posted In: Wine Business


6 Responses

  1. jerry - February 12, 2007

    You said it! There are plenty of let’s say under-$50 wines out there that couldn’t be made any better at any cost. And having drunk some “just fine” $100-$600 wines that were supposed to be 98-100 pointers, I just don’t see the point anymore unless it is to be a patron of the art of the winery and/or winemaker, which is fine if you can afford to be. On the other hand, there are plenty of “forgeries” made by the likes of Fred F. and others that masquerade in the reasonable price ranges so you do have to be picky about value and know your maker/importer.

  2. Tim Elliott - February 13, 2007

    The cost of the grapes and production is not the whole story, Tom, as I’m sure you know. For wineries in Napa Valley, for example, supply and demand has driven the cost of grapes and land to such high levels that a retail of at least $25-30 a bottle is needed to make any money. Another point is not every winery owner is independently wealthy so bank loans are needed to support most winery cash flow further driving the costs up. But your point about value is well taken as a winery can’t just charge whatever they want (or sometimes need) for their product. That balancing act is another dirty little secret.

  3. Tom S - February 13, 2007

    For a lot of vintners, the most expensive part of production is EGO. I’ve found many owners that say “my wine is as good as so and so” therefore I’m charging as much as them, or more. To charge a large sum to simply to draw attention to the wine is another factor.

  4. cheryl - February 13, 2007

    And if you are buying through the channel, don’t forget the distributor mark-ups…and the retail mark-ups as well.

  5. Deena - February 13, 2007

    Hi Tom,
    “Value is experiencing something that far exceeds your expectations for quality at the price you paid for it.”
    One funny thing about expectations and quality when it comes to wine though – people are highly suggestive. They often end up experiencing exactly the thing they expect from a wine – if they think it will be great they think it’s great after tasting it too. If they think it will be horrible, they think it’s horrible after tasting it too.
    Presentation is a huge part of any food/wine tasting experience, and speaking strictly in the context of taste experience, price is one of the factors that set up mental expectations that can affect the experience of tasting.

  6. Joel - February 13, 2007

    Here’s the deal – wine pricing is one of the most “marketing” driven consumer products I’ve ever dealt with or seen. You build a brand and reputation based on your skill level (yes, you do actually have to make a good product) and on how well it is marketed. The Marketing drives demand up, way up in some cases. Wine is inherently limited in supply and therefore you can drive the price up.
    At some point, momentum takes over and if a winery puts out “average” wine it can still charge an ton for it b/c of pure reputation and momentum.
    What can bust this cycle? I’m not sure anything. And I don’t buy that perception makes a wine great – you may convince yourself that “I just blew $200 on this so its great” and I’m sure some of that makes it into the hype-cycle of a wine but I don’t buy that discussion.
    On the plus side, with 5000 some-odd wineries in the US there will be really great wines that no one knows about and new ways of getting those wines into people’s hands, most likely facilitated by the Internet as most businesses, will unearth those wines. Whether that drives the price of the “undiscovered” wines up or brings down the price of “discovered” wines remains to be seen. But the “group-think” that is happening on the web now and is slowly but surely penetrating into the wine world makes a change almost inevitable…

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