What? Too much, too little?
Years ago when I purchased Coffaro wines I remember David’s newsletters which shot straight from the hip…I might still have an Aca Modot hanging around somewhere in the basement. In one of those newsletters, probably 15-20 years ago he slammed the rising retail cost of wines by other wineries. Not surprising his winery is still beating the high market price drum. Loved that he had always an interest in state of the art movie projection in his winery.
Add - Here’s a link to one of his letters in a public forum … Coffaro Forum: Letter to Wine Business Monthly
The best fruit grabs upwards of $20,000/Ton. Good French oak is $1,000. (We’re at $37 already) You’re not getting 3,000 cases of top shelf wine. The lots will be in the 300 case range for the high end fruit. You want scores with that? 98-100 point winemakers are in short supply and aren’t cheap. Top critics don’t simply drop into every Tom, Dick and Harry winery asking if you want your wine rated so where is that free advertising coming from? Your cost/case will be much higher. Who pays the PG&E bill to keep those barrels cold? Compliance. Prepaid tax. Aging. Artwork. Shipping to cold storage. Storage. Shipping damage. Corked bottles. Bottle etching. Wine reserved for tastings. Commissions. Profit margin.
Evaporation/Topping wine. Every month each barrel will take about 1/3gal to top off. Over 18 months that’s 6 gal/barrel in evaporation. For 300 cases that’s 72 gallons recycled back into the atmosphere. About 36 cases. Say you are only using $10,000/ton fruit for topping. That’s still almost $6,000 in fruit. $6/bottle.
Wow ! What percentage of wineries are paying close to $20K/ton ? It must be a select few and I’m guessing we are talking cabernet sauvignon in prime Napa areas ?
I was assuming too little. As I mentioned above, I have no doubt most winemakers aren’t “getting rich” off of the endeavor. But for “star” (however you define that) winemakers, I assumed it would be more than $50k, though not wildly more. That said I defer to those ITB who are obviously closer to the reality of it than I am.
The % is obviously small but the article is about his $100 bottle of wine and nobody is going to spend $100/bottle on $45/bottle fruit. It’s all relative to a degree.
Oh, and what if you don’t sell out when release comes. Come on now, everyone sells out right away right? Say you sell through 1/2 of your production direct to customer. You still haven’t made a dime and the bills keep coming in.
Drink off the top quarter and trade the rest. ![[cheers.gif]](/uploads/db3686/original/2X/0/0ff9bfcdb0964982cd3240b6159868fbdf215b1a.gif "cheers"){kind=small}
Thanks for the perspective, everybody. For those ITB, I’m curious what you think the realistic maximum out-the-winery-door cost of a bottle might be (pre-distributor markup, etc.)
Brian, isn’t your comment below a bit a circular? Must keep prices high so that we can make money if we don’t sell all our product. Perhaps one of the reasons a release does not sell out is that it is priced too high in the first place.
I think Brian’s point is partly that starting a winery and selling 3000 cases of $100 Cabernet isn’t that easy (and recognize the article is more than ten years old). There are also startup costs and a delay of 2-3 years before the revenue starts to appear.
Note that the author of the piece did start his own winery and I don’t think it made him rich.
-Al
Jim, it’s about achieving economies of scale. The more wine you make, the cheaper each bottle costs to produce. So if you love supporting smaller producers, the end result is supporting producers with high per-bottle production costs.
Not really. Pricing isn’t arbitrary and it’s unreasonable to think everything will fly out of the warehouse on release. You take your cost of doing business and add enough of a margin to be able to live comfortably. Nobody has gotten rich by being the low price leader, except for maybe Sam Walton. You find what the market will pay and price accordingly. You lower your prices and you have just devalued your brand. I’m not saying that in a price gouging way. You have to make enough money in your business to help with the slow years. 2015 was a very poor vintage tonnage wise in NorCal. Your overall cost of doing business isn’t that much different but the available product is less. If you didn’t make any money in '14 because you didn’t charge enough then when more fruit comes available in '16 you won’t have the capital.
Does that make sense?
Frankly, I don’t care how much it costs to make a wine in the Napa Valley. Prices for grapes, top winemakers, land, etc., go up and down depending on supply and demand.
I care how good a wine is and how its price compares with comparable wines from the rest of the world. But, sticking with California, before I would pay $100 a bottle for a Cabernet, you are going to have to convince me why I should not be buying futures of wines like Ridge Monte Bello or Chateau Montelena that have wonderful and long track records for aging instead? If you cannot convince me of that, the price of your wine is going to have to be much lower or you will not get my business, period.
Once we get to the world market for these types of wines, I see I can buy 2014 futures of Canon and Beycheville for around $60 and Domaine de Chevalier for about $50. Again, you have to convince me why I should buy the wine of a newcomer with no track record instead.
This is not an easy business, but this is the reality. There is a lot of competition.
Like paying your lawyers, which should really be the first thing you pay for. Obviously.
This is a cool and easy-to-understand video on pricing elasticity:
Elasticity is the core to any pricing, wine or widgets. You might find that the Price-Demand curve, once you overlay costs, makes it so you’re never hitting a margin you need to live (let alone thrive in down years, like Brian said).
The hard part is that this isn’t an econ class - you can’t easily test new pricing and see how demand shifts. So, you need to (presumably) rely on what other, similar producers have done and make some assumptions about their margins to proxy for your own go-to-market.
I agree about the salary also. This is not only California, but Bay Area. I tell people from other areas all the time, I’ll tell you what our house costs, but you have to remember, it’s in California dollars, not real dollars. Ain’t nobody a “star” anything making only 50k.
And 150K for a winery building? Maybe for the building, but you’re paying 3 million for the land to put it on, and your parking and outdoor seating area. Also, we were at Quintessa for crush last year, they RENT an optical sorter for $200k per season of a couple of weeks.
That makes a lot of sense. You hit on something that makes this topic interesting to me. You say “pricing isn’t arbitrary.” From a consumer’s perspective, it often feels arbitrary when confronted with two (relatively) comparable bottles of wine from the same appellation, same vintage, same variety and (occasionally) even the same vineyard with dramatically different prices. If this were a normal market – and I recognize that it is not – the “low price leader” should be able to sell everything it produces in such a situation. Yet, as you note, the opposite often seems to be the case, with producers who have lowered their price having “devalued their brand” and, paradoxically, selling less than the producers who keep their prices higher.
That is great
REAL winemakers might have a <15 year old Toyota or Honda. Might.
.[/quote]
Keeping it real. 15 years (plus optional body damage).
