Is The Wine Price Too High
Or Too Low Or Just Right?

You’re in the wine aisle and you spot a nice bottle of pinot noir. The price tags says $19.99. Uh-oh. That sounds like a lot - or is it? Or is it a steal?

One aisle over is a highly rated Napa Valley cabernet for $99. Wow! A hundred dollars for a bottle of wine! Is it really that good? Is it worth the price?

Then you see a run-of-the-mill merlot for $6.99. Price is right but is the wine right?

Wine price is an age old question that has been debated as long as wine and money have been around. That is because there is no hard and fast answer to it. What has happened countless times is that some cheap wines are wonderful and some expensive wines are not. And vice versa. Personally, I am constantly amazed by that.

Much of it is psychological. Experiments have been done to determine how much of an effect knowing a wine’s price had on a person’s perception of the quality.

Many people will rate an cheap wine higher in quality if told that the wine was more expensive. The converse is true for more expensive wines. People tend to place more value on more expensive items regardless of their actual value.

The reality is that wine price is not just a function of quality but of other factors as well. So what drives the price?

• Value perception. At the risk of getting philosophical, this is subjective and the asking price is accordingly based on the opinion of the winemaker (not to mention the costs involved in making it). You, of course, may think otherwise.

  Value is just a matter of your perception of the quality and its worth to you. This is true in life and not just with wine. If you like it a lot, it will have value (economics 101). If you don’t, it’s all but worthless even if there is a $1000 price tag on the bottle.

• Scarcity. Simple supply and demand. If there were only 100 cases produced, that can drive the wine price up.
• Difficulty in production. This can be from how the grape is grown or harvesting issues or production techniques or how it is stored or how it is transported or labor costs or marketing costs, etc. etc. Lots of variables.
• Age. Older wines well aged will command a premium for two reasons. One is that there is the perception of high quality to the aged wine. Secondly, older wines are more scarce.
• Vintage. Some wines in high quality vintages may command higher prices.
• Vineyard. Some wines from small top of the line vineyards may command higher prices. This is because the climate and soil is very favorable for grapes. You know the old adage: location, location, location. This cranks up the value of the land and thus the wine price.
• Value of the vines. Older vines will produce fewer and higher quality grapes and thus less wine. Supply and demand again.
• Bottling. A wine in a fancy bottle may run a little more. In fact, did you know that a good chunk of the $1000+ price of the top of the line Louis XIII Cognac is due to the fancy bottle that contains it?
• Barrels. High quality barrels cost high quality money. So wines aged in those barrels will cost more.
• Reputation. If the winery or wine has a long standing high reputation, the prices will be higher. Chateau Lafite in France or Screaming Eagle in California or Dom Perignon Champagne come to mind. Like designer jeans, you’ll pay more for the name. That’s not to say these wines are not good but branding determines value in wine like in anything else.

So what’s the moral of the story? There are many things that drive the wine price but do not necessarily drive the quality of the wine or how much you like it or not.

Bottom line: Just like buying a house, it’s value is what you’re willing to pay for it.

Mystery solved.

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