Why Wine Is So Cheap?

Posted by Alan Boehmer Oct 23, 2006

So how do we account for the extreme differences in wines made from the same varietal?

The process of making wine is so simple that even our semi-aboriginal forebears figured it out. But there's a lot more to it than meets the eye and many factors determine the price of wine.

As we write this, there happens to be a huge overstock of wine in California. Premium wineries are selling premium products as bulk wine to appear on supermarket shelves under previously unknown labels. You might find a Merlot that the winery had planned to sell at $15 a bottle repackaged to sell for five or six dollars. Look for wines that carry appellations other than "California" to find the best values. Supply and demand play a huge role in the price of wine. At the other extreme, try to find a current vintage La Tâche for less than $300. Again, supply and demand.

There are many hidden costs, though, that have little to do with supply and demand. The cost of vineyard land, for example. That will have something to do with the price of a ton of grapes. Can the grapes be machine harvested, or must they be hand picked? Most of California's least expensive grapes come from the flat Central Valley, where machines do most of the work.

How much wine will be made has a lot to do with its final price. If you are making 100,000 cases, all the necessary lab work can be performed by one person, amortizing his salary over more than a million bottles. Cost per chemist? Negligible. But if your winery is small and you only plan to produce a couple hundred cases, you'll still need that lab work done. And at a much higher cost per bottle.

The last time we checked the price of a French oak barrel, it was around $750; and it begins to lose its character after about three vintages. Wineries worldwide have crafted less expensive solutions, such as putting removable French (or other) oak interior staves inside outer barrels that can be reused indefinitely. For high production, consumer grade wines, a winery may even resort to using oak chips in stainless steel tanks. That definitely keeps the retail price of wine down, sometimes even as low as two bucks.