How are wine prices calculated?

If you want to know how wine prices are calculated, Jancis Robinson published an article about this – it’s written by our Chief Winemaker Matt Parish. I summarize it here, but if you want the full scoop you need to subscribe to Jancis’ Purple Pages.

“Production costs of even the grandest red bordeaux are rarely more than 10 euros a bottle” –Jancis Robinson

In an article about a French wine called l’Extravagante, Jancis looked into the remarkably high price of icon wines. One of my favorite quips comes from this article: “Icon: is that one word or two?”

She correctly pointed out that even the grandest Bordeaux reds (which can use rather extravagant production methods) still rarely cost more than 10 euros a bottle to produce, “30 euros at most,” she adds, “if the Château is run on bank borrowings.”

Amen.

Some wineries drive the price up because there is a huge demand and the wine is rare in comparison to that demand. Others have centuries of history and tradition which lend credibility to their pricing (even though those prices have shot up a lot in recent history). But for the most part, as Robinson points out, the price has very little to do with the cost of production.

There’s a perfect price for any given wine region and wine style.

Enter Matt Parish, our chief winemaker at NakedWines.com.

So Matt wrote about his past experience including his work at Treasury on such luxury brands as Beringer and Stags’ Leap, and he “spilled the beans” on how the wine business calculates price. And I think calculate is a big word for some of the dart board pricing that I’ve seen on new “icon” projects. Then he goes into some detail about how Naked Prices differ.

For the full detail, you have to be a member of Jancis’ Purple Pages. But you can find a slightly less thorough version at the bottom of his explanation of the Naked Sweet Spot.

The bottom line is a lot of the wine business bases price on what you’re willing to pay.

Then they spend boatloads of money trying to get you to be willing to pay more (that’s all marketing and sales). And once they’ve spent that to get a little more money out of you, there’s actually very little profit to share with the winemaker. So you pay a lot for hot air. And the winemaker works his or her tush off for very little reward. What a shame.

And unfortunately, winemaking often takes the back seat to the marketing. As Matt says in his piece, “You can’t have it all, most winemakers choose grapes and most marketers choose packaging.”

We’d rather base things on cost of production.

Matt was scandalously open about our margins in his piece on the Purple Pages. You can know exactly how wines are priced. We look at cost of goods and apply a pretty flat margin across the whole range. So you actually get a lot of bang for your buck in the higher end wines. If you’re one of my dear Angels anyway. 🙂