Demystifying the cost of wine

When you walk the aisles of a wine shop or examine the pages of a restaurant’s wine list, you are probably looking at the prices as much as you are at the labels. Most wine purchases are certainly affected by the price, but just how is that price determined? Why does one Napa Valley Cabernet Sauvignon cost $20 while others are $100 and much higher? Why are some French Champagnes over $100 and Spanish sparklers almost always in the $10 range? To find out, I called Patty Held-Uthlaut, public relations director and co-owner of her family’s Stone Hill Winery in Hermann, who generously explained the several factors involved in wine pricing, starting with the cost of the grapes. The 2007 harvest, which began with a dramatic freeze that destroyed much of the Missouri crop, is a great example of how the difference between the anticipated cost of grapes and actual cost of grapes can change overnight. “Most wineries do contracts or a handshake with the grower and set a price per ton before harvest,” Held-Uthlaut said. But that totally changes when a winery has to find alternate sources of fruit, often from outside the state. When other states experience similar disaster freezes, as happened in 2007, the limited production and increased demand push up the price of fruit. I recently tasted a delicious Zinfandel from Steele Wines’ Shooting Star label, which retails for about $12. When I asked Bill Bishop, Steele’s national sales manager, how the winery, located north of Napa Valley, was able to produce such a nice wine for that price, he responded, “Our real estate is much cheaper than Napa, which results in much cheaper grapes.” Owning the vineyard also reduces the cost, as a winemaker doesn’t have to purchase fruit at the open market’s current prices. “We own several of our primary vineyards, which also keeps the price stable from vintage to vintage,” Bishop said. The type of aging and fermenting vessels can also strongly affect a wine’s price. White wines are generally fermented in stainless steel tanks, which can be used indefinitely. But if a white, like most reds, needs the character-enhancing effect of an oak barrel, a winery’s production costs begin to soar. “A new barrel made from American oak will cost $300 to $400, while a new French oak barrel will be more than double, even up to $800 to $900,” Bishop said. Vintners can get three to four years (uses) from an oak barrel, so the added expense of using oak instead of stainless steel is significant – $3 or more per bottle for wines aged in new French oak. If a wine has bubbles, labor pushes the cost yet higher. A Charmat (bulk- or tank-fermented) sparkling wine is economically produced by adding carbonation in volume. By making that same wine by the traditional method (méthode champenoise, or bottle-fermented), the labor and time involved has an extraordinary upward push on the price. Prices for French bubbly are pushed even higher because space is limited and production is difficult to increase in the Champagne region. Supply and demand also weigh in. No winery wants to have more than one vintage on the market at the same time, unless it has great red wines that benefit from the aging process. White wines in particular need to sell out each year before the next year’s wine is ready to be released. “Vignoles can demand a higher price because it sells out every year,” Held-Uthlaut explained. “Traminette and Chambourcin are wines that sell out because we have so few acres planted, and they aren’t available to purchase from other growers.” And don’t forget packaging. This includes the bottle, cork, foil capsule, label, boxes for shipping, shipping costs and taxes. The bottle glass can range from 50 cents to more than $2; an extra-long cork can be up to 50 cents. “Norton is bottled with a longer cork and a more expensive bottle,” Held-Uthlaut told me. Labels can be printed simply or gold-foil stamped and embossed. The wine tax on all wine sold in Missouri is 42 cents per gallon, or roughly $1 per case, of which 12 cents per gallon goes to the Missouri Grape and Wine Program to support marketing and research for our more than 70 Missouri wineries. Shipping costs range from $4 to $6 to ship a case from California and about $9 to $12 to get a case from Europe. After a winery determines its price for a case of wine, a wholesaler adds shipping and taxes and marks up that case an average of 25 percent. That becomes the price that a restaurant or retailer pays for the wine. Then the retailer or restaurant usually marks up the wine 40 percent to 50 percent, which allows for a profit. For consumers, the best pricing structure is one that allows enjoyable and frequent sipping without breaking the bank. For vintners, the best pricing structure is one that enables them to run out of their 2005 vintages the day before they release their 2006 vintages. That does not happen very often, but it is nice to try.