The truth about American wine prices
This is a tough pill to swallow, but anybody’s who has had the opportunity to travel to other wine producing countries has probably noticed that wine is way less expensive in most wine-producing countries.
Rowan got to mention that Americans pay twice as much for wine as Europeans when he went on Bloomberg the other day (see clip below). And I wanted to go into a little more detail on this subject…because it’s shocking, right?
And a lot of the European price is tax-based.
It’s even more shocking when you consider that European wines would be even cheaper if it weren’t for the excise taxes.
Take the UK market (which we know a thing or two about). There’s a flat excise on virtually any bottle of wine so Her Majesty takes over £2 a bottle. And then there’s a 20% VAT (you thought sales tax was bad!)
In the USA we pay much less… like $1.57 per GALLON (5 bottles) in excise tax. And sales tax, even in the costliest of counties is closer to 10%. It’s a far cry from the UK (and interesting side note: it’s also a far cry from beer where the most expensive ingredient IS taxes.)
So we can’t blame the taxman for our wine being expensive. On the contrary, compared to Her Majesty, Uncle Sam feels pretty generous.
But most Americans pay a marketing tax–a big one.
You’re not going to like this but the reason Americans pay more for more wine is because we’re willing to. We’re so used to overspending that the margins are just fatter over here. And wine brands are constantly marketing to us to convince us that they’re worth that high high price tag.
Marketers take advantage of us all the time. They know we think there’s a connection between price and quality and so we’ll assume really expensive wine must taste reallllly good. Studies have shown how naive we can be about price. They also know we’re suckers for a good story, so when there’s a great vintage, the price goes up. When there’s a crap vintage, the price goes up.
That said, even if we’re not paying huge taxes, the government has done more than its fair share to mess things up. Instead of the taxman taking a huge cut, state legislation pushes wineries to sell through distributors. They’re like government-mandated middlemen. They store the wine in bonded warehouses until they can resell it to authorized vendors like restaurants and wine shops.
Oh, and they take a cut.
So when somebody splurges on a $100 bottle of Napa Cab, maybe $10-20 goes into the production costs. A huuuge chunk goes into the cost of selling and marketing the wine, making it desirable to the distributors, creating incentives for the vendors to re-buy it from the distributors, and naturally getting the brand in front of consumers who will then re-re-buy it from the vendors.
That’s why they say “If you want to make a small fortune in wine, start with a big one.”
And what about direct to consumer? Cellar door sales, wine clubs and the lot?
Well tragically, most of the Direct to Consumer market has stuck to the same pricing because of the high cost of sales. This is probably worth its own blog post, but unless you’re 100% direct to consumer, you don’t want to peeve your distributors by undercutting their suggested retail pricing. Not to mention, even if you sell a lot straight to wine drinkers, you still spend ridiculous amounts of money every year marketing your wine through the conventional means so it’s not like you can just write those costs off.
Whether it’s by her Majesty or some middlemen, you and the winemaker get ripped off.
It’s like a big voluntary tax that doesn’t add to the quality of the wine. It’s allllll marketing. And what’s crazy is it’s alllll voluntary. We opt-in to this system. Sure the government forces distributors in a few states, but wineries are getting more and more rights to pursue direct to consumer sales in most parts of the country.
And that money doesn’t go to the winemaker either. So the two people who matter: the wine drinker and the winemaker get screwed.
So the only question is…if you had the option of making your wine 40-60% cheaper, without losing any of the quality and without paying the winemaker any less, would you? Well, we can’t do anything about taxes, but we can nix this voluntary marketing tax.
That’s why Angels save so much in the USA
If you check out our website in the UK or Aus (click the little flags at the bottom of the homepage), you’ll see that we only offer 25-50% off in the other countries.
That’s because there were fatter margins in the US. And the poor guys in the UK can’t do anything about royal excise tax.
But the US markup is almost entirely voluntary… not federally enforced!
So anybody willing to realize that the emperor’s wearing no clothes gets to come with us and save a whopping 40-60%.