Naked Truth

How To Lose Money Selling Wine for $800 a Bottle

I’ve previously written about how crazy wine prices are calculated for icon brands.

Now, I just read this article about even very clever business people manage to lose money on Penfolds despite the $800 pricetag on its flagship wine Penfolds Grange.

scrooge mcduck swimming in coins
How rich I’d be if I sold my wine for $800 a bottle

You know what really gets me? That somebody can sell a bottle of wine for more than $50 and be losing their shirt at the same time. And if you sell a wine for EIGHT HUNDRED dollars then you should be swimming in a pool of gold coins.

And yet, the article identifies the problem plain as day:

For while its wine makers could make wine, its managers struggled to manage.

“It’s winemakers could make wine.” That’s Daryl.

Earlier this week, I wrote about Daryl Groom, the man who made Grange and did a damn fine job making some of the most collectible vintages of Grange to date. That’s a big deal because Grange is “Australia’s most collectible wine” according to The Wine Spectator and that prestige makes keen business people go a little foggy sometimes.

“The desire to own Penfolds has a history of clouding the financial judgement of buyers, who’ve always been prepared to pay a healthy, or some may say unhealthy, premium to get their hands it.”

“Its managers struggled to manage.”

The article doesn’t go into a huge amount of detail on the failure of the management. It’s more a laundry list of people who have lost money buying Penfolds, investing heavily, giving up, and throwing in the towel with a huge loss. There’s one notable exception, the Oatleys who raked in a lot of money over the years selling the dream to big hungry companies like Fosters.

Mostly it seems like these big buyers overestimate how much profit there is in an $800 bottle of wine. You’d think a lot! Since the cost of production are probably under $40 a bottle. But then… you have to consider the “debt-fuelled growth and diversification” the article mentions has to pay for much more than the cost of production.

The unspeakably high cost of branding and marketing

When Fosters came in, they were buying the BRAND “Penfolds”. And Penfolds has the iconic Grange. Now it also has Bin 170 which is an eye-watering $1700 a bottle. And it has a whole range of more affordable wines too.

And when a company like Fosters sees that powerful brand name they think it’s worth billions. So they invest and expand and then have to flog the wine through all the sales channels where they flog beer. And it doesn’t always work.

So is the brand really worth BILLIONS? Is it worth more than the winemaker? Or the vineyards?

There’s a smarter way — Hire the winemakers. Screw the brand.

So you should feel very smart if you’re one of our Angels. Because while Fosters paid over $3.5 billion for the Penfolds brand (and Penfolds vines), we went and hired the winemaker for .. eh… less than $3.5 billion. And he has some vines just next door to the mother lode of Penfolds Shiraz.

Guess who got the better deal?

Guess who got the only sustainable deal?

High five! It’s us! So it won’t say Penfolds on the label. It’ll say DRG. Because Daryl Rex Groom made it and he stands behind it. Oh and the wine costs less than $30 if you funded it. So you don’t have to mortgage your home every time you want to open a bottle.

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